Research On Backers' Investment Behavior In Reward-based Crowdfunding

In recent years,crowdfunding has been established as another method of how entrepreneurs can meet their funding needs.It describes the mechanism through which entrepreneurs(fundraisers)try to find enough funds to implement their ideas(projects)by making an open call through the Internet to attract an arbitrary number of individuals(backers)who are willing to pledge money.In exchange,backers receive rewards.The type of reward depends on the crowdfunding model.To date,four different crowdfunding models dominate the market:equity-,lending-,donation-,and reward-based crowdfunding.On equity-and lending-based crowdfunding platforms,contributors invest money and expect monetary rewards in return.By contrast,on donation-based crowdfunding platforms,contributors donate money to charity projects.This dissertation focuses on reward-based crowdfunding.Fundraisers create projects for specific purposes for which backers can pledge money and receive non-monetary rewards in return.In this context,scholars have identified reward-based crowdfunding as a new area of study for researchers because it represents a new way of how individuals communicate and exchange resources[1].The latest available statistics of the global crowdfunding market present a positive picture,showing that the total volume of funds collected via crowdfunding platforms is around US$34.4 billion annually[2].However,based on an in-depth examination of the statistics of the reward-based crowdfunding market we observe two interesting issues.First,more than 50%of all crowdfunding project fail[2].Second,in the crowdfunding context,user loyalty is low[3-6].Thus,backers often stop to continue to pledge to projects after their first pledging experience.This reveals an alarming picture.It is conceivable that there might be a point of saturation after which the reward-based crowdfunding market stops growing,or,in the worst case,begins shrinking.Based on these issues the following research questions are raised:(1)What are the key factors that determine an individual's decision to contribute to reward-based crowdfunding projects,and how do crowdfunding platforms influence this decision?(2)Why do the majority of contributors of reward-based crowdfunding platforms stop contributing after their first pledge?This dissertation engages these research questions by developing two research models based on trust and distrust theory,dissatisfaction theory,the theory of reasoned action,and the valence framework.The validity and reliability are tested by conducting two observational studies with 229 and 233 participants.Based on an extensive literature review and a comprehensive analysis of the institutional logic that individuals in the reward-based crowdfunding context follow,individuals' trust and distrust are identified as possible vital factors that can explain their behavior in the crowdfunding context.Thus,the first research model aims to shed light on how trust and distrust in the community of fundraisers and the intermediary influence individuals' decisions to become backers.To understand how the platform influences this behavior,a unique set of institutional mechanisms that form institutional trust is proposed.Adopting the trust theory,we analyze how individuals' perceptions of each mechanism influence their trust and distrust in fundraisers and the intermediary.Moreover,based on the trust transfer theory,the effects of trust or distrust in the intermediary on trust or distrust in the fundraisers are analyzed.The results provide novel insights into how platforms influence individuals'decisions to become contributors.Based on this,we can provide recommendations to platform managers and fundraisers on how to increase project success rates,which ultimately affects crowdfunding success.The second research question in this dissertation deals with the emerging issue that most backers on reward-based crowdfunding platforms are one-time backers.Therefore,a post-pledge model is developed.It is built upon the assumption that backers'dissatisfaction with the fundraiser's performance might be a key deterrent for them to continue supporting projects on a specific platform.Our prior study provides empirical evidence that distrust in the community of fundraisers has a significant negative impact on the attitudes of backers towards pledging to projects.For this reason,the second study investigates whether the negative emotions of backers resulting from the dissatisfaction with a fundraiser's performance can foster distrust in the community of fundraisers.Therefore,we argue that dissatisfaction with fundraiser performance might be a key antecedent of distrust in the community of fundraisers.Consequently,distrust is postulated to be an essential mediator in the relationship between dissatisfaction and backers' intention to continue supporting projects on a specific platform.To gain further insights into factors that might drive backers' intentions of continuance,a part of the model is developed based on a modified version of Kim et al.'s[7]extended valence framework.It allows one to perform a comparative analysis of how backers' perceptions of possible gains and losses influence their decision to continue pledging.The results provide new insights into backers' post-pledge behavior and how the perception of dissatisfaction affects their loyalty.Based on the findings,relevant recommendations can be provided to platform managers and fundraisers on how to increase backer loyalty.To sum up,this dissertation is designed to address(1)the role of backers' trust and distrust in the context of reward-based crowdfunding,(2)the lack of research on how platforms can reduce individuals' distrust and increase their trust in the community of creators and the intermediary,(3)how distrust emerges in the context of reward-based crowdfunding,and(4)whether distrust in the community of fundraisers is a key factor that stops backers from continuing to pledge to projects.One major contribution to crowdfunding literature is that based on institutional trust theory and institutional logic this dissertation develops a unique set of institutional mechanisms(i.e.,defining of platform rules,the performance of monitoring,and pledging security mechanism),that are found to be key antecedents of trust and distrust in the community of fundraisers and the platform.Another significant contribution of this study is that it increases our understanding of how different types of trust and distrust influence individuals' pledge behavior.Prior studies in the crowdfunding context examined the effect of trust on behavioral intention;however,they neglected distrust as another possible major antecedent.This study also contributes to the literature by increasing our knowledge of what factors decrease backer loyalty towards a platform.Based on the(dis)satisfaction theory[8],we found that dissatisfaction with the fundraiser's performance is a key deterrent for individuals to continue pledging to projects on a specific platform.In addition,we contribute to the literature by providing empirical evidence that distrust in the community of creators is an important mediator in the relationship between dissatisfaction with the fundraiser and continuance intention.Finally,another important contribution is that it extends the valence framework[9]to the crowdfunding context.The findings reveal that perceptions of potential benefits play a more significant role in individuals' decisions to continue pledging to projects than perceptions of potential risks.