Fundraiser engagement, third-party endorsement and crowdfunding performance: A configurational theory approach

Reward-based crowdfunding is a typical two-sided platform (fundraiser side and backer side) with high information asymmetry. While existing research indicates that signals from fundraisers and backers can impact crowdfunding performance, the interplay among these signals warrants further investigation. Drawing on signaling theory, this study adopts a configurational perspective and utilizes the fsQCA method and linear regression to investigate the combined effects of fundraiser engagement (update and fundraiser comment), third-party endorsement (backer comment and Facebook sharing), and project preparedness (video, image, and description) on crowdfunding performance. Drawing data from the reward-based crowdfunding platform Indiegogo, this research pointed out that these signals cannot generate better crowdfunding performance alone and examined substitution and complementary effects among different signals. Based on the linear regression and fsQCA results, configurations that lead to high crowdfunding performance are identified. We found that project preparedness must work with other signals to produce high crowdfunding performance. Besides, we summarized these configurations into two patterns that may lead to high crowdfunding performance: a fundraiser engagement-driven pattern and a third-party endorsement-driven pattern. This study contributes a configurational perspective and valuable insights into how signals can work together to mitigate information asymmetry in crowdfunding.

Role of successive round as a quality signal in equity crowdfunding: Novel evidence from the perspective of investors' preferences

Equity crowdfunding provides entrepreneurs and founders the opportunity to raise funds from a large number of potential investors, using quality signals to influence their investment decisions. Drawing from the lens of signaling theory and the elaboration likelihood model, this study explores the role of successive equity crowdfunding rounds as a quality signal in shaping investors' preferences in crowdfunded firms and its influence on their investment decisions. Our findings reveal that successive equity crowdfunding rounds serve as quality signals, modeling investors' preferences and thereby resulting in a high magnitude of success factors. The successive round is a strong quality signal that has a positive and significant impact on investors' investment decisions in subsequent equity crowdfunding rounds. The increasing preferences of investors due to the successive round augments the magnitude of success factors and helps entrepreneurs in successfully achieving large funding targets, high overfunding, and attracting a large number of investors in subsequent equity crowdfunding campaigns, even with a low level of equity offering.

Signaling and meaning in organizational analytics: coping with Goodhart's Law in an era of digitization and datafication

The future of work will be measured. The increasing and widespread adoption of analytics, the use of digital inputs and outputs to inform organizational decision making, makes the communication of data central to organizing. This article applies and extends signaling theory to provide a framework for the study of analytics as communication. We report three cases that offer examples of dubious, selective, and ambiguous signaling in the activities of workers seeking to shape the meaning of data within the practice of analytics. The analysis casts the future of work as a game of strategic moves between organizations, seeking to measure behaviors and quantify the performance of work, and workers, altering their behavioral signaling to meet situated goals. The framework developed offers a guide for future examinations of the asymmetric relationship between management and workers as organizations adopt metrics to monitor and evaluate work.

Explaining reward crowdfunding backers' intentions and behavior

Purpose

Earlier research into crowdfunding adoption has drawn on social psychology, trust, signaling and well-being theories. Despite its wide appeal and use, the technology acceptance model (TAM) has received little attention in terms of explaining the adoption of crowdfunding platforms. The current study examines the applicability of two versions of this framework: the original TAM1 and the extended TAM2 frameworks.

Design/methodology/approach

Data were collected through a survey distributed to the users of Finland's leading reward crowdfunding website, Mesenaatti, who have backed crowdfunding campaigns previously. The authors employed structural equation modelling (SEM–lavaan package) and conducted a series of quality tests to alleviate concerns with certain biases.

Findings

Analyses of 556 observations exhibit support for all hypotheses underlying both TAM frameworks, with two exceptions. Contrary to expectations, voluntariness does not moderate the effect of subjective norms on contribution intentions, and the effect of perceived ease-of-use is primarily mediated by perceived usefulness, rather than directly influencing intentions.

Research limitations/implications

Analyses of 556 observations show support for all of the hypotheses that underlie both TAM frameworks, with two exceptions. Contrary to expectations, voluntariness does not moderate the effect of subjective norms on contribution intentions, and the effect of perceived ease-of-use is primarily mediated by perceived usefulness, rather than directly influencing intentions.

Originality/value

First, the study extends the generalizability of TAM to the context of crowdfunding and with respect to financial contribution behavior. Second, it shows that backers' perceptions of platform usefulness and ease-of-use are important antecedents of crowdfunding contribution behavior, and that the former exerts greater influence than the latter. Third, it further clarifies the influences of relevant antecedents of crowdfunding backers' contribution intentions and behaviors. Specifically, the authors show that experience only weakly moderates the influence of subjective norms on contribution intentions, and voluntariness does not moderate this association. The authors discuss explanations for these findings and their implications for research and practice.

Does Social Influence Change with Other Information Sources? A Large-Scale Randomized Experiment in Medical Crowdfunding

We examine how social influence interacts with other information sources to affect user behaviors in the context of medical crowdfunding. We conduct a large-scale randomized field experiment on a leading medical crowdfunding platform, showing friends’ donation information to donors in the treatment group and not showing such information in the control group, and examine how the likelihood to donate differs. In addition, we conduct a survey on Amazon Mechanical Turk to evaluate the informational value of different case attributes in conveying the patients’ need for help to donors. We find that for cases containing attributes with high informational value (e.g., minor patient, severe conditions), social influence is insignificant. In contrast, for cases lacking attributes with high informational value, social influence significantly increases donors’ likelihood to donate. Overall, our results show that the impact of social influence depends on the informational value of other information sources, suggesting that the social influence in our context is primarily informational. Our findings indicate that rather than generating an entrenchment effect, where cases with attributes of high informational value attract disproportionate benefits, social influence can increase donation likelihood to cases that lack such attributes, promoting more equal access to resources overall.

History: Olivia Liu Sheng, Senior Editor; Yuliang (Oliver) Yao, Associate Editor.

Supplemental Material: The online appendices are available at https://doi.org/10.1287/isre.2022.1189 .

Effects of supply chain disruptions due to COVID-19 on shareholder value

Purpose

The purpose of this research work is to examine the financial effect of supply chain disruptions (SCDs) caused by coronavirus disease 2019 (COVID-19) and how the magnitude of such effects depends on event time and space that may moderate the signaling environment for shareholder behaviors during the pandemic.

Design/methodology/approach

This study analyses a sample of 206 SCD events attributed to COVID-19 made by 145 publicly traded firms headquartered in 21 countries for a period between 2020 and 2021. Change in shareholder value is estimated by employing a multi-country event study, followed by estimating the differential effect of SCDs due to the pandemic by event time and space.

Findings

On average, SCDs due to pandemic decrease shareholder value by −2.16%, which is similar to that of pre-pandemic SCDs (88 events for 2018–2019). This negative market reaction remains unchanged regardless of whether stringency measures of the firm's country become more severe. Supply-side disruptions like shutdowns result in a more negative stock market reaction than demand-side disruptions like price hikes. To shareholder value, firm's upstream or downstream position does not matter, but supply chain complexity serves as a positive signal.

Originality/value

This study provides the first empirical evidence on the financial impact of SCDs induced by COVID-19. Combining with signaling theory and event system theory, this study provides a new boundary condition that explains the impact mechanism of SCDs caused by the pandemic.

How scientists interpret and address funding criteria: value creation and undesirable side effects

Scientists and funding bodies are interdependent actors involved in an ongoing two-way signalling interaction; however, we lack insight on the social mechanisms underpinning this interaction. To address this issue, we examine how successfully funded scientists interpret and address criteria set by the funding body to maximise their chances of funding success. We also consider the possible adverse side effects that can arise from scientists' competitive efforts to address these criteria. Our findings identify a portfolio of funding criteria-research feasibility, research alignment and team credentials-that scientists address when preparing grant applications. Effectively addressing these criteria enhances the prospects of funding success and value creation. However, we also find that scientists can over-address funding criteria, which is counterproductive and yields undesirable side effects. Our research therefore makes an important distinction between the possibilities for value creation and the value creation frictions that can unintentionally arise based on how grant-submitting scientists interpret and address the criteria signalled by the funding body. Our research has implications for policymakers, funding bodies and scientists which we also discuss.

Does personality still matter in e-commerce? How perceived hubris influences the assessment of founders' trustworthiness using the example of reward-based crowdfunding

Reward-based crowdfunding broadens the scope of e-commerce transactions, as prototypical products are pre-sold under conditions of considerable uncertainty. To date, we know little about the mechanisms that underlie decisions to back reward-based crowdfunding campaigns. However, it is likely that startup founders' possibility of showcasing their personalities in video pitches signals their trustworthiness, particularly, as other features, such as quality seals and customer testimonials, are often unavailable. We use signaling theory to reinforce the move from a feature-oriented perspective to a signaling perspective, as signals can transmit information about startup founders' otherwise imperceptible qualities and abilities. Based on a survey (N = 108), we investigate how perceived hubris - proven to be particularly salient in startup contexts - influences the funding decision of potential backers. We find that abilities and legitimacy of a startup founder are rated positively when s/he is perceived as hubristic. These results have implications for crowdfunding campaigns and highlight the relevance of personality traits in electronic markets.

Signals for Entrepreneurial Family Lending: Psychological Capital as an Intent Signal

Family financing has become a powerful channel for entrepreneurs to obtain entrepreneurial funding. How do family members use intent and quality signals to select new ventures to provide lending support? Building on the signaling theory, this study provides the first quantitative evidence using a sample of 166 samples of family lenders in China. Our findings reveal that psychological capital can support entrepreneurs to obtain family lending. As an intent signal, psychological capital becomes more influential when quality signals, corporate competitive advantage, and firm performance perform more positively. This study emphasizes that family financing support is not only out of love or altruism and extends the literature concerning the influence of positive psychological capital in financial investment decisions.

They do not look alike: what kind of private investors do equity crowdfunded firms attract?

Using a dataset of 170 firms that successfully fundraised via the two most prominent UK equity crowdfunding platforms, we investigate whether and how having successfully run an equity crowdfunding campaign is associated to the reputation of follow-on venture capital investors attracted. From the comparison with a control group of firms that received a seed round from business angels, we found that firms that have run a successful equity crowdfunding campaign attract lower reputable VCs. These results are confirmed when controlling for endogeneity and for firms’ characteristics. Considering the shareholder structure chosen by the firm raising equity crowdfunding, we found that firms opting for a direct shareholder structure, which entails higher coordination and agency costs, attract less reputable VCs compared to firms opting for the nominee shareholder structure.

Blockchain as a governance mechanism for tackling dark side effects in interorganizational relationships

Purpose

This paper aims to investigate how the emerging blockchain technology can tackle dark side or dysfunctional effects at different stages of the interorganizational relationship life cycle. The rationale for this study stems from the somewhat paradoxical causes of dysfunctional effects. In particular, concepts such as trust and cooperation that typically result in positive relationship outcomes may also lead to negative effects under certain conditions. This contradiction creates a governance headache for organizations in their quest for initiating, developing, maintaining and enhancing efficient interorganizational relationships.

Design/methodology/approach

The study draws upon multiple organizational theories (agency, signaling, transaction cost, population ecology, institutional) and develops a conceptual understanding of how blockchain can serve as a safeguard for tackling dark side effects in interorganizational relationships. Primarily, the paper outlines a set of research propositions that provides a platform for developing an actionable managerial decision framework. In addition, the authors conduct an automated textual analysis of qualitative blockchain expert opinion using the ALCESTE software and uncover salient themes about blockchain governance.

Findings

The blockchain ledger distributes trust among participants and keeps dark side effects at bay. Hence, blockchain can transform conventional approaches for handling dark side effects into value creating activities. The results of an automated textual analysis on a corpus of expert opinions provides preliminary support for several aspects of blockchain governance. Furthermore, the study articulates a decision framework that managers can use for optimal relationship governance and identifies several areas for future research.

Research limitations/implications

This paper is conceptual in nature and draws upon multiple theoretical perspectives to outline a set of research propositions. Thus, lack of empirical testing is a current limitation. However, the findings from an automated textual analysis of expert opinions provide exploratory but encouraging support for the power of blockchain to tackle dark side effects.

Practical implications

Managers can deploy blockchain creatively while selecting interorganizational relationship partners. For example, provenance issues in organizations’ supply chains can be efficiently managed using blockchain. Likewise, organizations may also create efficient learning around blockchain to gain efficiencies in relationship management.

Originality/value

Conventional approaches for managing dark side effects in interorganizational relationships rely mainly on ex post governance strategies. By contrast, this paper supplements the extant approach by discussing ex ante strategies that can be deployed at different stages of the interorganizational relationship cycle, e.g. initiation, maintenance/development and termination to better address dark side effects.

The Effect and Impact of Signals on Investing Decisions in Reward-Based Crowdfunding: A Comparative Study of China and the United Kingdom

When traditional financial institutions faced difficulties in the task of assisting micro, small and medium-sized enterprises (MSMEs) with capital allocations, crowdfunding can upsurge as an innovative and vibrant vehicle that can support and assist the activity of such MSME’s, by financing their activity and instrumenting the process of risk-sharing. Simultaneously with its enormous growth and popularity, crowdfunding is faced by several key challenges, one of biggest such challenges referring to the problem of information asymmetry that can exist between fundraisers and potential backers. Based on the signaling theory, a research taxonomy has been developed for a comparative analysis between China and the UK. This has been accomplished by retrieving secondary data from the following crowdfunding platforms: Dreamore (Chinese platform) and Crowdfunder (UK platform). The objective of the study is to investigate both the effect and the impact that signals (goal setting, project comments and updates) have upon mitigating the problem of information asymmetry, in order to make the project successful. We have thus deployed an Ordinary Least Square (OLS) regression and validated the models through a robustness check. The findings reveal that signals actively mitigate the problem of information asymmetry in both countries, but this varies in the sense that higher goal setting has a more positive/impactful relationship with project success in the UK than it does in China. Project comments are more positively associated with project success in China as compared to the UK, whereas project updates are more negatively related to project success in China as compared to the UK. These findings demonstrate the importance that signals have upon successful crowdfunding activities/campaigns, highlighting the theoretical and practical influence and relevance for potential fundraisers in the two aforementioned economies.

Creating Mutual Gains to Leverage a Racially Diverse Workforce: The Effects of Firm-Level Racial Diversity on Financial and Workforce Outcomes Under the Use of Broad-Based Stock Options

Despite substantial scholarly attention to workforce demographic diversity, existing research is limited in understanding whether or in what contexts firm-level racial diversity relates to performance and workforce outcomes of the firm. Drawing on social interdependence theory along with insights from social exchange and psychological ownership theories, we propose that the use of broad-based stock options granted to at least half the workforce creates the conditions supporting a positive relationship between workforce racial diversity and firm outcomes. We examine this proposition by analyzing panel data from 155 companies that applied for the “100 Best Companies to Work For” competition with responses from 109,314 employees over the five-year period from 2006 to 2010 (354 company-year observations). Findings revealed that racial diversity was positively related to subsequent firm financial performance and individual affective commitment and was not significantly associated with subsequent voluntary turnover rates, when accompanied by a firm’s adoption of broad-based stock options. However, under the nonuse of broad-based stock options, racial diversity was significantly related to higher voluntary turnover rates and lower employee affective commitment, with no financial performance gains. By documenting the beneficial effects of financial incentives in diverse workplaces, this paper extends theory asserting the value of incentives for performance.

Social and financial aid for disaster relief operations using CSR and crowdfunding

Purpose

The purpose of this paper is to understand the interlinkages between corporate social responsibility (CSR) and crowdfunding in the context of disaster relief operations (DRO). It intends to explore how information quality moderates the relationship of CSR and crowdfunding to achieve financial and social stability. The study also controls variables such as type of disaster, size of the firm and sector to which the firms belong while drawing implications.

Design/methodology/approach

The study collects empirical data in an Indian context through a structured questionnaire. The respondents belong to organizations which made a financial contribution toward DRO during the past decade (2008–2018). The sample size for data analysis is 232 responses belonging to different industries like plastic, chemical, textile and apparel, automotive parts and electronics, and construction. The study employs partial least squares structural equation modeling for testing the hypothesis.

Findings

Results indicate a positive effect of CSR activities on donation-based crowdfunding to achieve financial and social normalcy in a DRO. CSR can thus be used as an alternate way to support DRO. Results also reveal that quality of information positively impacts the relationship between crowdfunding and social aid as well as financial aid offered to the victims of the disasters. It is further observed that the type of disaster accounts for the inflow and frequency of funds made by companies as a part of their CSR activities.

Research limitations/implications

The study restricts its analysis to CSR contributions made by Indian firms for DRO in an Indian context. While the study is centered in an Indian context, it holds strong implications by offering guidelines and framework for integrating funds of the government, CSR contributions of companies and donations made by citizens. The outcome also provokes thoughts on testing the results with multiple disasters across the globe in order to validate the findings and possibly extend them.

Originality/value

The approach of the study holds a unique slot in understanding concepts relating to CSR, crowdfunding and information science literature in the context of DRO. The study offers unique contribution in making the readers aware how CSR funds, when guided through a donation-based crowdfunding platform can help achieve social and financial aid for the victims of natural disaster.

Does the Role of Media and Founder’s Past Success Mitigate the Problem of Information Asymmetry? Evidence from a UK Crowdfunding Platform

Crowdfunding is an innovative concept for a new start-ups seeking financial support for their distinctive and novel projects. Despite their popularity, crowdfunding platforms face several key challenges amongst which is information asymmetry between entrepreneurs and influential backers, where credible information must be disclosed by the founders (entrepreneurs) to the potential “backers” in order to assess the potentiality of the project. In order to fill this gap, we developed and tested a model that examines the signaling interaction between the founder and a potential backer through media and the founders’ past success. This model also examines how these two signals (i.e., media and past success) interact so as to mitigate the problem of information asymmetry and to make the project successful. A total of 14,887 projects were extracted from a reward-based platform named Crowdfunder. The data was analyzed by performing Tobit and logistic regression and the model was validated by using the robustness technique. The results strongly mitigate the problem of information asymmetry which improves the rate of success in projects floated on the Crowdfunder platform. We believe that our study will significantly contribute to this nascent yet developing research area by probing for information mechanisms to succeed in crowdfunding.