Winner Takes All? The 'Blockbuster Effect' on Crowdfunding Platform

51 Pages Posted: 26 Jul 2017 Last revised: 18 Mar 2022

See all articles by Zhiyi Wang

Zhiyi Wang

University of Colorado at Boulder - Leeds School of Business

Lusi Yang

Eller College of Management, University of Arizona

Jungpil Hahn

National University of Singapore (NUS) - Department of Information Systems and Analytics

Date Written: December 15, 2015

Abstract

Crowdfunding platforms are characterized by an uneven distribution of quality and resources. Some projects achieve outstanding and exceptional performance. Those projects, which we define as “blockbuster projects,” are believed to have a considerable impact on crowdfunding platforms, especially on other concurrent projects. There are two plausible yet opposing predictions: they may exhibit both a negative effect by monopolizing backer attention and resources and a positive effect by increasing the activeness of backer side. This tension could be further complicated, considering that blockbusters are inherently heterogeneous, which could result in different inter-relations with other concurrent projects. To fully understand this tension, this study examines the effects of blockbuster projects on the overall performance of concurrent projects on the platform and the nuances of such effects for different inter-relations between blockbusters and other projects. Drawing on the cross-side network effects literature and integrating insights from the unique features of crowdfunding, we develop a theoretical framework that highlights the multidimensional view of blockbuster effects: we propose that blockbuster projects have an overall positive effect on the performance of concurrent projects (overall effect), and such positive effect is stronger for related blockbusters (local effect) and blockbusters emerging before (temporal effect). Using data from a leading reward-based crowdfunding platform, the proposed hypotheses are tested and largely supported. Additional analyses, based on off-platform data and backer data, verify the mechanism driving the blockbuster effects: blockbusters increase the popularity of the platform, whereby backers participating in the blockbusters tend to develop positive impressions and heightened expectations, so that they are likely to participate in other concurrent projects. This study contributes to the crowdfunding literature on interactions among projects, the literature on distinctive agents in online markets, and the cross-side network effects literature. We also discuss practical implications for project creators and platform operators.

Keywords: Blockbuster Effects, Cross-Side Network Effects, Overall Effect, Local Effect, Temporal Effect, Backer Participation, Economics of Crowdfunding

Suggested Citation

Wang, Zhiyi and Yang, Lusi and Hahn, Jungpil, Winner Takes All? The 'Blockbuster Effect' on Crowdfunding Platform (December 15, 2015). Available at SSRN: https://ssrn.com/abstract=3007075 or http://dx.doi.org/10.2139/ssrn.3007075

Zhiyi Wang

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Lusi Yang (Contact Author)

Eller College of Management, University of Arizona ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Jungpil Hahn

National University of Singapore (NUS) - Department of Information Systems and Analytics ( email )

Singapore

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
149
Abstract Views
895
rank
265,964
PlumX Metrics