Vicarious Goal Pursuit Outweighs Herding in Crowdfunding: Evidence from Kickstarter.com

30 Pages Posted: 19 Apr 2017 Last revised: 30 Jan 2018

Hengchen Dai

University of California, Los Angeles (UCLA) - Anderson School of Management

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School

Date Written: January 29, 2018

Abstract

Reward-based crowdfunding is a popular fundraising mechanism whereby creators of entrepreneurial projects solicit capital from backers to reach a funding goal and offer future products/services in return. We examine backers’ contribution patterns using a novel dataset of 26,516 projects collected at 30-minute resolution from Kickstarter.com, the world’s largest crowdfunding website. Past research drawing on standard utility-based theory has largely focused on economic factors as drivers of backers’ contributions, concluding that backers are more likely to fund a project when they observe greater contributions from other backers (i.e., herding) or are not concerned about the project failing to meet its funding goal. We propose that social preferences should also matter such that backers have prosocial motives to help creators reach their funding goals. Indeed, we find that backers are nearly three times as likely to fund a project right before it meets its funding goal as they are right after. This “vicarious goal pursuit” effect is amplified when the nature of a project tends to evoke backers’ altruistic motives as well as when a project’s creator is a single person (as opposed to multiple people or an organization). These results suggest that backers’ prosocial motives not only play a role in the reward-based crowdfunding context but also can outweigh the opposing effects of economic factors including herding and certainty about crowdfunding campaign success. Altogether, this research advances the field’s understanding of backers’ decision making processes and extends prior work in management and psychology about goals and prosocial behavior.

Keywords: Goal, Prosocial Motivation, Social Preferences, Herding, Crowdfunding

JEL Classification: D03, D12, D83

Suggested Citation

Dai, Hengchen and Zhang, Dennis, Vicarious Goal Pursuit Outweighs Herding in Crowdfunding: Evidence from Kickstarter.com (January 29, 2018). Available at SSRN: https://ssrn.com/abstract=2954217 or http://dx.doi.org/10.2139/ssrn.2954217

Hengchen Dai

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Dennis Zhang (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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