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To exploit or explore? The impact of crowdfunding project descriptions and backers’ power states on funding decisions

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Abstract

Reward-based crowdfunding attracts significant research efforts to understand its success drivers; the current study expands such efforts by exploring the word choices within project descriptions and their potential effects for crowdsourced funding of innovative projects. Project descriptions have the potential to influence backer funding decisions significantly, and creators have complete control over them, suggesting the relevance of this previously unexplored factor. A secondary data analysis of 245,704 online requests for new project funding indicates greater success for project descriptions that emphasize exploitation rather than exploration themes. A series of follow-up experiments also demonstrate that risk perceptions mediate decision-making processes, and that a person’s power state is an important moderator of funding intentions. In particular, potential backers with less power are more likely to fund a project with an exploitation-focused description rather than one with an exploration focus. Conversely, backers with greater power perceive both project types as equally attractive, but they also are more likely to fund an explorative project than those with less power. These novel contributions help clarify how funding for startups varies as a function of specific word choices in funding requests, as well as the role of power in determining individual funding behaviors.

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Notes

  1. https://help.kickstarter.com/hc/en-us/articles/115005047893-Why-is-funding-all-or-nothing-

  2. https://www.nevaehmedia.com/kickstarter-success-statistics-per-popular-categories-infographics/

  3. For completeness, we provide the results for the contrasts that examine the effects of power differences for each message type in Web Appendix G.

  4. We ran the same analysis using Model 7, without any interaction between power and the direct effect of exploitation versus exploration. The results are consistent with the Model 8 results. Noting its greater empirical rigor, we report the Model 8 results in the main text.

  5. For completeness, we also examine the effect of backer power on funding intentions and amounts for exploitation-focused projects (n = 191). The sample size of the high-power group is 150 and that of the low-power group is 41. The independent sample t-tests find that there are no signifcant differences in funding intentions and amounts across high- and low-power groups (Mintention_high_power = 4.14, SD = 1.70; Mintention_low_power = 4.49, SD = 1.87; t = −1.07, p > .10; Mamount_high_power = 42.07, SD = 31.31; Mamount_low_power = 49.02, SD = 33.15; t = −1.21, p > .10)

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  1. Collat School of Business, University of Alabama at Birmingham, Birmingham, AL, 35294-4460, USA

    Yufei Zhang & Thomas E. DeCarlo

  2. College of Business, University of Louisville, Louisville, KY, 40292, USA

    Andrew S. Manikas

  3. Culverhouse College of Business, University of Alabama, Tuscaloosa, AL, USA

    Abhi Bhattacharya

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  1. Yufei Zhang
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Zhang, Y., DeCarlo, T.E., Manikas, A.S. et al. To exploit or explore? The impact of crowdfunding project descriptions and backers’ power states on funding decisions. J. of the Acad. Mark. Sci. 51, 444–462 (2023). https://doi.org/10.1007/s11747-022-00871-w

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