Update Frequency and Funder Involvement in Reward Crowdfunding Markets
53 Pages Posted: 9 Aug 2021 Last revised: 28 Feb 2022
Date Written: February 26, 2022
I study the role of product development updates and funder involvement in improving reward crowdfunding outcomes. Reward crowdfunding is a growing source of funding for entrepreneurs with limited access to traditional financing. The limited regulation in reward crowdfunding markets, however, leaves it up to the entrepreneur and the funders to solve their agency problems. Using data from one of the largest reward crowdfunding platforms, I find that entrepreneurs who provide less frequent voluntary updates experience more involvement by funders in the product development process. The entrepreneur responds to this heightened involvement by adjusting their announcement length but not their update frequency. Finally, I find that funders who are responsive in their product development involvement improve project outcomes. Taken together, my results support that voluntary updating and funder involvement can work together to resolve agency frictions in reward crowdfunding markets.
Keywords: crowdfunding; update frequency; funder involvement; product development
JEL Classification: M41; O16; O31; L15; G14
Suggested Citation: Suggested Citation