Skip to main content
SpringerLink
Log in

Channel structure and funder incentive in prosocial crowdfunding

  • Published:
Information Technology and Management Aims and scope Submit manuscript

Abstract

Prosocial crowdfunding relies on funders’ altruistic contribution to sustain. The channel structure of platforms may affect funders’ altruistic incentives. It is critical to understand how funders choose different channels, direct vs. intermediated, and how the co-existence of the two channels affect funders’ contribution. Our study builds a theoretical framework based on theories of altruism to understand funders’ incentives, including pure altruism, warm glow, and reputation. The framework helps us to explicate funders' incentives for choosing between channels and predict potential changes in funder contribution after the introduction of the direct channel. Using data from Kiva.org and the unique setup of a natural experiment, we find that funders with high level of pure altruism are more likely to select the direct channel. We also find that the introduction of the new direct channel stimulates instead of cannibalizing contribution on the intermediated channel. It suggests that the direct channel segments riskier projects and meets the needs of pure altruists, while the intermediated channel promotes contribution to less risky projects with increased publicity. The market segments have a positive impact on the total contribution. We discuss the theoretical and practical implications of our findings.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. The Zip Kenya program was shut down in 2015. It might be interesting to investigate whether the channel was not sustainable.

  2. Zip soon stopped announcing this repayment rate and never disclosed repayment information of individual loans as Kiva. When we contacted them for details, they mentioned that it was their policy not to disclose the information.

References

  1. Mackenzie A (2015) The fintech revolution. London Business School Rev 26(3):50–53

    Article  Google Scholar 

  2. World Bank (2013) Crowdfunding’s potential for the developing world. infoDev, Finance and Private Sector Development Department. World Bank, Washington

    Google Scholar 

  3. Morduch J (1999) The microfinance promise. J Econ Lit 37(4):1569–1614

    Article  Google Scholar 

  4. Daley-Harris S, Laegreid L (2006) State of the microcredit summit campaign: Report 2006. Microcredit Summit Campaign, Washington

    Google Scholar 

  5. Lin M, Prabhala NR, Viswanathan S (2013) Judging borrowers by the company they keep: friendship networks and information asymmetry in online peer-to-peer lending. Manage Sci 59(1):17–35

    Article  Google Scholar 

  6. Mollick E (2014) The dynamics of crowdfunding: an exploratory study. J Bus Ventur 29(1):1–16

    Article  Google Scholar 

  7. Zheng H, Li D, Wu J, Xu Y (2014) The role of multidimensional social capital in crowdfunding: a comparative study in China and US. Inform Manag 51(4):488–496

    Article  Google Scholar 

  8. Liu D, Brass D, Lu Y, Chen D (2015) Friendships in online peer-to-peer lending: pipes, prisms, and relational herding. MIS Q 39(3):729–742

    Article  Google Scholar 

  9. Ahlers GK, Cumming D, Günther C, Schweizer D (2015) Signaling in equity crowdfunding. Entrep Theory Pract 39(4):955–980

    Article  Google Scholar 

  10. Herzenstein M, Sonenshein S, Dholakia UM (2011) Tell me a good story and I may lend you money: the role of narratives in peer-to-peer lending decisions. J Market Res 48:S138–S149

    Article  Google Scholar 

  11. Burtch G, Ghose A, Wattal S (2015) The hidden cost of accommodating crowdfunder privacy preferences: a randomized field experiment. Manage Sci 61(5):949–962

    Article  Google Scholar 

  12. Burtch G, Ghose A, Wattal S (2016) Secret admirers: an empirical examination of information hiding and contribution dynamics in online crowdfunding. Inf Syst Res 27(3):478–496

    Article  Google Scholar 

  13. Agrawal A, Catalini C, Goldfarb A (2015) Crowdfunding: geography, social networks, and the timing of investment decisions. J Econ Manag Strat 24(2):253–274

    Article  Google Scholar 

  14. Galak J, Small D, Stephen AT (2011) Microfinance decision making: a field study of prosocial lending. J Market Res 48:S130–S137

    Article  Google Scholar 

  15. Lin M, Viswanathan S (2015) Home bias in online investments: an empirical study of an online crowdfunding market. Manage Sci 62(5):1393–1414

    Article  Google Scholar 

  16. Gajjala V, Gajjala R, Birzescu A, Anarbaeva S (2011) Microfinance in online space: a visual analysis of Kiva. Org Develop Pract 21(6):880–893

    Article  Google Scholar 

  17. Burtch G, Ghose A, Wattal S (2014) Cultural differences and geography as determinants of online pro-social lending. MIS Q 38(3):773–794

    Article  Google Scholar 

  18. Smith MD, Telang R (2010) Piracy or promotion? The impact of broadband internet penetration on DVD sales. Inf Econ Policy 22(4):289–298

    Article  Google Scholar 

  19. Brynjolfsson E, Hu Y, Rahman MS (2009) Battle of the retail channels: How product selection and geography drive cross-channel competition. Manage Sci 55(11):1755–1765

    Article  Google Scholar 

  20. Goolsbee A (2001) Competition in the computer industry: online versus retail. J Ind Econ 49(4):487–499

    Article  Google Scholar 

  21. Hagiu A, Wright J (2015) Marketplace or reseller? Manage Sci 61(1):184–203

    Article  Google Scholar 

  22. Kwark Y, Lee GM, Pavlou P, Qiu L (2016) The spillover effects of user-generated online product reviews on purchases: evidence from clickstream data. In: Proceedings of international conference on information systems (ICIS)

  23. Olson M (1965) The logic of collective action. Harvard University Press, Cambridge

    Google Scholar 

  24. Samuelson PA (1955) Diagrammatic exposition of a theory of public expenditure. Rev Econ Statis 37:350–356

    Article  Google Scholar 

  25. Roberts RD (1984) A positive model of private charity and public transfers. J Polit Econ 92(1):136–148

    Article  Google Scholar 

  26. Andreoni J (1988) Privately provided public goods in a large economy: the limits of altruism. J Public Econ 35(1):57–73

    Article  Google Scholar 

  27. Andreoni J (1989) Giving with Impure altruism: applications to charity and ricardian equivalence. J Polit Econ 97:1447–1458

    Article  Google Scholar 

  28. Harbaugh WT (1998) The prestige motive for making charitable transfers. Am Econ Rev 88(2):277–282

    Google Scholar 

  29. Benabou R, Tirole J (2003) Intrinsic and extrinsic motivation. Rev Econ Stud 70(3):489–520

    Article  Google Scholar 

  30. Ariely D, Bracha A, Meier S (2009) Doing good or doing well? Image motivation and monetary incentives in behaving prosocially. Am Econ Rev 99(1):544–555

    Article  Google Scholar 

  31. Mellström C, Johannesson M (2008) Crowding out in blood donation: was Titmuss right? J Eur Econ Assoc 6(4):845–863

    Article  Google Scholar 

  32. Soetevent AR (2005) Anonymity in giving in a natural context—A field experiment in 30 churches. J Public Econ 89(11–12):2301–2323

    Article  Google Scholar 

  33. Ottoni-Wilhelm M, Vesterlund L, Xie H (2017) Why do people give? Testing pure and impure altruism. Am Econ Rev 107(11):3617–3633

    Article  Google Scholar 

  34. Lacetera N, Macis M (2010) Social image concerns and prosocial behavior: field evidence from a nonlinear incentive scheme. J Econ Behav Organ 76(2):225–237

    Article  Google Scholar 

  35. Allison TH, McKenny AF, Short JC (2013) The effect of entrepreneurial rhetoric on microlending investment: an examination of the warm-glow effect. J Bus Ventur 28(6):690–707

    Article  Google Scholar 

  36. Karlan DS, Zinman J (2008) Credit elasticities in less-developed economies: implications for microfinance. Am Econ Rev 98(3):1040–1068

    Article  Google Scholar 

  37. Dehejia R, Montgomery H, Morduch J (2012) Do interest rates matter? Credit demand in the Dhaka slums. J Dev Econ 97(2):437–449

    Article  Google Scholar 

  38. Field E, Pande R, Papp J, Rigol N (2013) Does the classic microfinance model discourage entrepreneurship among the poor? Experimental evidence from India. Am Econ Rev 103(6):2196–2226

    Article  Google Scholar 

Download references

Acknowledgements

The authors thank participants for their comments and suggestions when an early version of the paper was presented at the 13th Statistical Conference in E-Commerce Research in 2017. This research was supported by the Research Grants Council of the Hong Kong Special Administrative Region, China [Grant 7004776]. All remaining errors are our own.

Author information

Authors and Affiliations

  1. Department of Information Technology and Decision Sciences, G. Brint Ryan College of Business, University of North Texas, Denton, TX, USA

    Ling Ge

  2. School of Business and Management, Shanghai International Studies University, Shanghai, China

    Xuechen Luo

Authors
  1. Ling Ge
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Xuechen Luo
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Xuechen Luo.

Ethics declarations

Conflicts of Interest

The authors certify that they have no conflicts of interest with the journal and its editorial board or any organization or entity in the subject matter or materials discussed in this manuscript.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ge, L., Luo, X. Channel structure and funder incentive in prosocial crowdfunding. Inf Technol Manag (2023). https://doi.org/10.1007/s10799-023-00389-9

Download citation

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1007/s10799-023-00389-9

Keywords

Search

Navigation