Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response

35 Pages Posted: 10 May 2018 Last revised: 23 Dec 2018

See all articles by Jorge Mejia

Jorge Mejia

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies

Gloria Urrea

University of Colorado at Boulder - Leeds School of Business

Alfonso Pedraza Martinez

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies

Date Written: April 2, 2018

Abstract

Online crowdfunding has emerged as a powerful tool to raise funds for emergency response. Crowdfunding campaigns can use two transparency tools to attract donors: updates and certification. Updates are additional messages that the organizer issues after launching the campaign and are a form of operational transparency when they communicate the campaign's work to donors. Alternatively, certification is a form of conventional transparency that ensures the campaign truly benefits a charitable purpose. Using an econometric analysis, we investigate the effects of transparency on donations. We study the direction of causality and mechanisms behind work-related updates by conducting experiments. Results from the econometric analysis using over 100,000 campaigns benefiting victims of emergencies reveal that both updates and certification have positive effects on donations. Each additional work-related word in an update (operational transparency) increases donations on average by $65 per month, while certification (conventional transparency) raises funds on average by $22 per month. Results from the experiments con rm the direction of causality; posting work-related updates in crowdfunding campaigns increases donations. Two mechanisms explain this effect: donors' enhanced perceptions of effort and perceptions of trust.

Keywords: humanitarian funding, crowdfunding, operational transparency, donations

Suggested Citation

Mejia, Jorge and Urrea, Gloria and Pedraza Martinez, Alfonso, Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response (April 2, 2018). Kelley School of Business Research Paper No. 18-44, Available at SSRN: https://ssrn.com/abstract=3168728 or http://dx.doi.org/10.2139/ssrn.3168728

Jorge Mejia

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States

Gloria Urrea (Contact Author)

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

Boulder, CO 80309-0419
United States

Alfonso Pedraza Martinez

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States

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