Prosocial Spectrum of Crowdfunding Projects

Abstract

In online reward-based crowdfunding platforms, backers often pledge more money than necessary. This paper studies the magnitude, types, and motivations of such prosocial funding behavior, using a pledge-level data set from Kickstarter. First, prosocial funding was common (22% of backers), substantial (19% of the total pledge amount), and essential to 43% of successful projects. Second, there were significant variations in prosocial funding across the projects. On average, the prosocial funding as a percentage of the total pledge amount for a project in dance/theatre categories exceeded that of a project in games/design categories by more than 20%. There were two types of prosocial backers: funders who pay extra for rewards and donors who pay without requesting a reward. We propose funders and donors act according to a fair-exchange and a communal relationship, respectively. The proposed social relationships are consistent with the funding behavior according to project and creator characteristics. Moreover, about 90% of the variations in prosocial funding across the product categories were driven by donors. Thus, the perceived needs in funding rather than the fair values of offerings is the main driver for the prosocial behavior in crowdfunding. Overall our results underscore the importance of prosocial funding and the need for creators to tailor their prosocial strategies according to the target (funders vs. donors).

Keywords: Crowdfunding, Prosocial Funding, Prosocial Spectrum, Communal Relationship, Fair-Exchange Relationship

JEL Classification: M31, L26, L17, O31