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Exploring the subjective nature of crowdfunding decisions

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  • Ren, Jie
  • Raghupathi, Viju
  • Raghupathi, Wullianallur

Abstract

Project funding performance which determines the rise and fall of the crowdfunding platform, is largely governed by the subjective behavior of investors. Leveraging the perspective of attribute substitution theory, we focus on two factors that affect the subjective funding behaviors of investors: emotional language in the project description and risky funding choices of prior investors. According to the same theory, we classify the projects as either hedonic or utilitarian, identifying whether the association between the factors and funding success of projects vary for hedonic vs. utilitarian projects. Using Kickstarter data, our analysis shows a positive association between the risk-seeking investor ratio and project success for hedonic projects. In addition, it identifies a positive association between the extent to which arousal words are used in project descriptions and project success for all projects. Thus, both positive associations are stronger for hedonic projects than for utilitarian projects. Our findings suggest that investors in crowdfunding contexts do not always make rational decisions in funding projects. This has implications for how a project is positioned within the crowdfunding solicitation marketplace.

Suggested Citation

  • Ren, Jie & Raghupathi, Viju & Raghupathi, Wullianallur, 2021. "Exploring the subjective nature of crowdfunding decisions," Journal of Business Venturing Insights, Elsevier, vol. 15(C).
    • Handle: RePEc:eee:jobuve:v:15:y:2021:i:c:s2352673421000111
    DOI: 10.1016/j.jbvi.2021.e00233
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