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
Date Written: September 12, 2022
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
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