The Consequences of Authenticity: Quantifying Racial Signals and their Effects on Crowdfunding Success

67 Pages Posted: 11 Sep 2016 Last revised: 3 Mar 2020

See all articles by Lauren Rhue

Lauren Rhue

University of Maryland - Robert H. Smith School of Business

Jessica Clark

New York University, Department of Information, Operations, and Management Sciences, Students

Date Written: July 23, 2018

Abstract

Crowdfunding campaigns must display authenticity in order to gain potential backers’ trust, yet racial minorities may face bias if they include signals of their racial identity in their pages. There are numerous ways that racial identity can be signaled on crowdfunding platforms, and this work explores how those signals affect crowdfunding success. We further examine how three types of authenticity (idiosyncratic, consistent, and categorical) may impact success via interactions among the racial signals. The main analysis comprises a large-scale study of more than 100,000 projects gathered from Kickstarter.com. We derive four racial signals: visual vs. textual and personal vs. campaign, and use propensity-score matching to create a quasi-experimental design estimating the effects of signaling racial identity.

We find that all four racial signals can significantly affect success, projects containing signals of African-American identity face lower success rates, the effects of Asian signals vary depending on the signal and the project category, and that racial anonymity in general leads to higher success rates. The novel methodology that we use to infer racial identity through multiple signals should be useful not only to researchers but also to online platforms wishing to reduce bias. Furthermore, our findings mean that future research on racial dynamics in online platforms must consider multiple signals of identity and multiple racial groups.

Keywords: crowdfunding, big data, diversity, economics, text mining, matched sample, empirical analysis

Suggested Citation

Rhue, Lauren and Clark, Jessica, The Consequences of Authenticity: Quantifying Racial Signals and their Effects on Crowdfunding Success (July 23, 2018). Available at SSRN: https://ssrn.com/abstract=2837042 or http://dx.doi.org/10.2139/ssrn.2837042

Lauren Rhue (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Jessica Clark

New York University, Department of Information, Operations, and Management Sciences, Students ( email )

New York, NY
United States

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