Donors, Buyers, and Information Disclosure in Crowdfunding Markets: A Case of Platform Split-up

50 Pages Posted: 7 Jan 2021 Last revised: 12 Sep 2022

See all articles by Lu Yan

Lu Yan

Hong Kong Polytechnic University

Qiang Liu

Mitchell E. Daniels, Jr School of Business, Purdue University

Ting Zhu

Purdue University - Krannert School of Management

Date Written: September 12, 2022

Abstract

Crowdfunding platforms are a fast-growing approach for entrepreneurs to finance their new product developments. Improving crowdfunding campaigns’ performance with more diverse participants, however, is difficult. In this paper, the authors investigate how platform specialization changing in platform size and backers’ composition (donors vs. buyers) influences platform participant behaviors and campaign outcomes with the Indiegogo platform split-up. Their results show a higher probability of reaching funding goals for campaigns on a reward-based platform (main platform) after the launch of a new donation-based platform. Crowdfunding platform participants’ strategic responses to the platform split-up drive such improvements in crowdfunding outcomes. First, fewer campaigns are launched on the main platform after the platform split-up. Second, creators provide more visual campaign information (i.e., images and videos here) to mitigate information asymmetry that is more of a concern after the platform split-up as a larger proportion of backers becomes buyers, who are more sensitive to such visual information than donors. These findings are consistent with the notion that potential backers’ motivations for supporting a campaign drive creators’ information disclosure strategy. The study provides important managerial implications for platforms and participants.

Keywords: platform specialization, crowdfunding, information asymmetry, donors, buyers, information disclosure

Suggested Citation

Yan, Lu and Liu, Qiang and Zhu, Ting, Donors, Buyers, and Information Disclosure in Crowdfunding Markets: A Case of Platform Split-up (September 12, 2022). Available at SSRN: https://ssrn.com/abstract=3723845 or http://dx.doi.org/10.2139/ssrn.3723845

Lu Yan (Contact Author)

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Qiang Liu

Mitchell E. Daniels, Jr School of Business, Purdue University ( email )

403 Mitch Daniels Blvd.
West Lafayette, IN 47907
United States

Ting Zhu

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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