Skip to main content
SpringerLink
Log in

Success factors and complex dynamics of crowdfunding: An empirical research on Taobao platform in China

  • Research Paper
  • Published:
Electronic Markets Aims and scope Submit manuscript

Abstract

In recent years, as a novel financing mechanism, crowdfunding has gained popularity worldwide. In China, Crowdfunding started in 2011 and has experienced extremely fast growth since then. Several studies have identified success factors for crowdfunding. While these studies help infer the dynamics of crowdfunding, such dynamics have not been sufficiently examined, particularly by large-scale empirical studies. In addition, the relationship between crowdfunding market characteristics and project funding success remains fuzzy. In this research, we first empirically assessed the effect of crowdfunding success factors using a large sample (N = 5128) collected from Taobao.com, a leading crowdfunding platform in China. Built upon these factors, we conducted a multi-period, multi-party simulation study that evaluate crowdfund raisers’ project positioning decisions and investors’ project funding decision in a massive market. In the simulation study, we varied market characteristics such as the number of projects, number of investors per project, entrepreneurs’ moral risk, and ratio of community over financial benefits, to observe their effect on participants’ decisions and consequently, project funding success rate. Results reveal that dynamics of a crowdfunding market are rather complex. These insights contribute to a more in-depth theoretical understanding of crowdfunding, as well as provide useful guidance for crowdfund raisers, investors, and administrators.

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
Fig. 4
Fig. 5

Similar content being viewed by others

References

  • Ahlers, G. K. C., Cumming, D., Günther, C., & Schweizer, D. (2015). Signaling in equity crowdfunding. Entrepreneurship Theory and Practice, 39(4), 955–980.

    Article  Google Scholar 

  • Allison, T. H., Davis, B. C., Short, J. C., & Webb, J. W. (2014). Crowdfunding in a prosocial microlending environment: Examining the role of intrinsic versus extrinsic cues. Entrepreneurship: Theory and Practice, 39(1), 53–73.

    Google Scholar 

  • Baethge, C., Klier, J., & Klier, M. (2016). Social commerce—State-of-the-art and future research directions. Electronic Markets, 26(3), 269–290.

    Article  Google Scholar 

  • Beier, M., & Wagner, K. (2014). Crowdfunding between social media and e-commerce: Online communication, online relationships and fundraising success on crowdfunding platforms. Social Science Electronic Publishing.

  • Belleflamme, P., Lambert, T., & Schwienbacher, A. (2013). Individual crowdfunding practices. Venture Capital, 15(4), 313–333.

    Article  Google Scholar 

  • Belleflamme, P., Lambert, T., & Schwienbacher, A. (2014). Crowdfunding: Tapping the right crowd. Journal of Business Venturing, 29(5), 585–609.

    Article  Google Scholar 

  • Caudoux, A., & Geoffroy, J. (2015). Financing solutions to sustain the growth of SMEs and MTEs and lay the foundations for future competitiveness. Financial Stability Review, 19, 37–49.

    Google Scholar 

  • Colombo, M. G., Franzoni, C., & Rossi-Lamastra, C. (2015). Internal social capital and the attraction of early contributions in crowdfunding. Entrepreneurship Theory and Practice, 39(1), 75–100.

    Article  Google Scholar 

  • Elmer, V. (2013). Crowdfunding in China could be $50 billion business by 2025. http://qz.com/148119/crowdfunding-in-china-could-be-50-billionbusiness-by-2025.

  • Elsner, W., Heinrich, T., & Schwardt, H. (2015). Dynamics, complexity, evolution, and emergence—The roles of game theory and simulation methods. Microeconomics of Complex Economies, 277–304.

  • Everett, C. R. (2014). Origins and development of credit-based crowdfunding. SSRN Electronic Journal.

  • Frydrych, D., Bock, A., Kinder, T., & Koeck, B. (2014). Exploring entrepreneurial legitimacy in reward-based crowdfunding. Venture Capital, 16(3), 247–269.

    Article  Google Scholar 

  • Funk, A. S. (2016). Institutions influencing the evolution of crowdfunding in China a review of the World Bank report on Crowdfunding’s potential for the developing world. Crowdfunding in Europe, 125–131.

  • Giudici, G., Guerini, M., & Rossi-Lamastra, C. (2013). Why crowdfunding projects can succeed: The role of proponent’s individual and territorial social capital. SSRN Electronic Journal, 1–20.

  • Golić, Z. (2014). Advantages of crowdfunding as an alternative source of financing of small and medium-sized enterprises. Proceedings of the Faculty of Economics in East Sarajevo, (8), 39–48.

  • Goodman, A., & Polycarpou, L. (2013). The sustainability-social networking nexus. Sustainability, 6(1), 26–32.

    Article  Google Scholar 

  • InfoDev. (2013). Crowdfunding’s potential for the developing world. In Finance and private sector development department.

    Google Scholar 

  • Katherine, C., & Daniel, S. (2016). Crowdsourcing for a better world. Information Technology & People, 29(1), 221–247.

    Article  Google Scholar 

  • Lam, P. T. I., & Law, A. O. K. (2016). Crowdfunding for renewable and sustainable energy projects: An exploratory case study approach. Renewable and Sustainable Energy Reviews, 60, 11–20.

    Article  Google Scholar 

  • Maynard Smith, J. (1982) Evolution and the theory of games. Cambridge University Press. ISBN 0-521-28884-3.

  • Mollick, E. (2014). The dynamics of crowdfunding: An exploratory study. Journal of Business Venturing, 29(1), 1–16.

    Article  Google Scholar 

  • Mollick, E., & Robb, A. (2016). Democratizing innovation and capital access: The role of crowdfunding. California Management Review, 58(2), 72–87.

    Article  Google Scholar 

  • Munnukka, J., & Jarvi, P. (2014). Perceived risks and risk management of social media in an organizational context. Electronic Markets, 24(3), 219–229.

    Article  Google Scholar 

  • Ordanini, A., Miceli, L., Pizzetti, M., & Parasuraman, A. (2011). Crowd-funding: transforming customers into investors through innovative service platforms. Journal of Service Management, 22(4), 443–470.

  • Peng, L., & Lai, L. (2014). A service innovation evaluation framework for tourism e-commerce in China based on BP neural network. Electronic Markets, 24(1), 37–46.

    Article  Google Scholar 

  • Powers, T. V. (2012). SEC regulation of crowdfunding intermediaries under title III of the JOBS act. Banking & Financial Services Policy Report, 31(10), 1–7.

    Google Scholar 

  • Schwienbacher, A., & Larralde, B. (2010). Crowdfunding of small entrepreneurial ventures. Handbook of Entrepreneurial Finance, 2010, 1–23.

  • Shao, B., Shi, L., Xu, B., & Liu, L. (2012). Factors affecting participation of solvers in crowdsourcing: An empirical study from China. Electronic Markets, 22(2), 73–82.

    Article  Google Scholar 

  • Stemler, A. R. (2013). The JOBS act and crowdfunding: Harnessing the power-and money-of the masses. Business Horizons., 56, 271–275.

    Article  Google Scholar 

  • Sun, Y., Kuang, X., & Sun, D. (2015). The geographic concentration of china’s e-business enterprises: Where they gather and why. Electronic Markets, 26(1), 31–42.

    Article  Google Scholar 

  • Taylor, P. D., & Jonker, L. B. (1978). Evolutionarily stable strategies and game dynamics. Mathematical Biosciences, 40(1–2), 145–156.

    Article  Google Scholar 

  • Ulrike, B., Linda, H., & Reinhard, J. (2016). Dynamics of customer interaction on social media platforms. Electronic Markets, 26(3), 199–202.

    Article  Google Scholar 

  • Valanciene, L., & Jegeleviciute, S. (2013). Valuation of crowdfunding: Benefits and drawbacks. Economics and Management, 18(1), 39–48.

    Article  Google Scholar 

  • Vasileiadou, E., Huijben, J. C. C. M., & Raven, R. P. J. M. (2016). Three is a crowd? Exploring the potential of crowdfunding for renewable energy in the Netherlands. Journal of Cleaner Production, 128, 142–155.

    Article  Google Scholar 

  • Wang, S., He, X., & Di, J. (2015). The incentive compatibility, operational mechanism and risk supervision of crowdfunding model - concurrently on the problems and trends of Chinese crowdfunding. Finance and Economy, 03, 55–60.

    Google Scholar 

  • Wenqing, W., Mingxia, F., & Liming, Z. (2016). Successful factors and herding phenomenon of crowdfunding. Soft Science., 2(30), 5–8.

    Google Scholar 

  • Wu, J., Zhuo, S., & Wu, Z. (2016). National innovation system, social entrepreneurship, and rural economic growth in China. Technological Forecasting and Social Change, 121, 238–250.

    Article  Google Scholar 

  • Zhang, W. T., Yan, X. B., & Chen, Y. (2017). Configurational path to financing performance of crowdfunding projects using fuzzy set qualitative comparative analysis. Engineering Economics, 28(1), 25–34.

    Article  Google Scholar 

  • Zheng, H., Hung, J. L., Qi, Z., & Xu, B. (2016). The role of trust management in reward-based crowdfunding. Online Information Review, 40(1), 97–118.

    Article  Google Scholar 

  • Zhou, W., & Hinz, O. (2015). Determining profit-optimizing return policies – A two-step approach on data from taobao.com. Electronic Markets, 26(2), 103–114.

  • Zhu, L., Zhang, Q., Lu, H., Li, H., Li, Y., Mclellan, B., et al. (2016). Study on crowdfunding’s promoting effect on the expansion of electric vehicle charging piles based on game theory analysis. Applied Energy, 196, 238–248.

    Article  Google Scholar 

Download references

Acknowledgements

This paper is supported by National Social Science Foundation of China (No. 17BGL230).

Author information

Authors and Affiliations

  1. School of Management, Wuhan University of Technology, Luoshi Road 122, Wuhan, 430070, China

    Kefan Xie, Zimei Liu & Sishi Liu

  2. School of Economic and Management, Wuhan University, Bayi Road 299, Wuhan, 430070, China

    Long Chen

  3. Department of Information Technology and Decision Sciences, Old Dominion University, Norfolk, VA, 23454, USA

    Weiyong Zhang

  4. Department of Management & Operations, Villanova University, 800 Lancaster Avenue, Villanova, PA, 19085, USA

    Sohail S. Chaudhry

Authors
  1. Kefan Xie
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Zimei Liu
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Long Chen
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Weiyong Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Sishi Liu
    View author publications

    You can also search for this author in PubMed Google Scholar

  6. Sohail S. Chaudhry
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Long Chen.

Additional information

Responsible Editor: Lida Xu

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Xie, K., Liu, Z., Chen, L. et al. Success factors and complex dynamics of crowdfunding: An empirical research on Taobao platform in China. Electron Markets 29, 187–199 (2019). https://doi.org/10.1007/s12525-018-0305-6

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12525-018-0305-6

Keywords

JEL classification

Search

Navigation