IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v14y2021i5p194-d543345.html
   My bibliography  Save this article

Legitimacy and Reciprocal Altruism in Donation-Based Crowdfunding: Evidence from India

Author

Listed:
  • Indu Khurana

    (Department of Economics and Business, Hampden–Sydney College, 172 Via Sacra, Hampden-Sydney, VA 23943, USA)

Abstract

The donation-based crowdfunding platforms witness a mix of different entities seeking funding for numerous campaigns, adding complexities in understanding the donor behavior and factors that motivate donation. This study builds upon the economic theory of charitable giving and examines the ethical dilemma that donors face during the selection process. Using the data from Ketto.org, the biggest crowdfunding platform in India, this paper investigates the rank-order preference of donors while making a selection across heterogeneous entities and campaigns. The results show that campaigns run by non-profit organizations registered with causes that qualify for a tax-deduction receive a higher level of funding. Donors then fund unregistered non-profit organizations, followed by campaigns run by individuals. Demonstrating legitimacy by using subtle cues, like tagging “with tax-benefit,” motivates the donors to provide a higher amount of funding.

Suggested Citation

  • Indu Khurana, 2021. "Legitimacy and Reciprocal Altruism in Donation-Based Crowdfunding: Evidence from India," JRFM, MDPI, vol. 14(5), pages 1-16, April.
  • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:5:p:194-:d:543345
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/14/5/194/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/1911-8074/14/5/194/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
    2. Jörn Block & Lars Hornuf & Alexandra Moritz, 2018. "Which updates during an equity crowdfunding campaign increase crowd participation?," Small Business Economics, Springer, vol. 50(1), pages 3-27, January.
    3. Aleksandrina Ralcheva & Peter Roosenboom, 2020. "Forecasting success in equity crowdfunding," Small Business Economics, Springer, vol. 55(1), pages 39-56, June.
    4. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
    5. Thomas H. Allison & Blakley C. Davis & Jeremy C. Short & Justin W. Webb, 2015. "Crowdfunding in a Prosocial Microlending Environment: Examining the Role of Intrinsic versus Extrinsic Cues," Entrepreneurship Theory and Practice, , vol. 39(1), pages 53-73, January.
    6. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
    7. Gerald E. Auten & Holger Sieg & Charles T. Clotfelter, 2002. "Charitable Giving, Income, and Taxes: An Analysis of Panel Data," American Economic Review, American Economic Association, vol. 92(1), pages 371-382, March.
    8. Gerrit K.C. Ahlers & Douglas Cumming & Christina Günther & Denis Schweizer, 2015. "Signaling in Equity Crowdfunding," Entrepreneurship Theory and Practice, , vol. 39(4), pages 955-980, July.
    9. Clotfelter, Charles T., 1997. "The Economics of Giving," Working Papers 97-19, Duke University, Department of Economics.
    10. Othmar M. Lehner, 2013. "Crowdfunding social ventures: a model and research agenda," Venture Capital, Taylor & Francis Journals, vol. 15(4), pages 289-311, October.
    11. Denis Frydrych & Adam J. Bock & Tony Kinder & Benjamin Koeck, 2014. "Exploring entrepreneurial legitimacy in reward-based crowdfunding," Venture Capital, Taylor & Francis Journals, vol. 16(3), pages 247-269, July.
    12. Othmar M. Lehner & Alex Nicholls, 2014. "Social finance and crowdfunding for social enterprises: a public-private case study providing legitimacy and leverage," Venture Capital, Taylor & Francis Journals, vol. 16(3), pages 271-286, July.
    13. Garry Bruton & Susanna Khavul & Donald Siegel & Mike Wright, 2015. "New Financial Alternatives in Seeding Entrepreneurship: Microfinance, Crowdfunding, and Peer–to–Peer Innovations," Entrepreneurship Theory and Practice, , vol. 39(1), pages 9-26, January.
    14. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    15. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    16. Mark Ottoni-Wilhelm & Lise Vesterlund & Huan Xie, 2017. "Why Do People Give? Testing Pure and Impure Altruism," American Economic Review, American Economic Association, vol. 107(11), pages 3617-3633, November.
    17. Alexandra Moritz & Joern Block & Eva Lutz, 2015. "Investor communication in equity-based crowdfunding: a qualitative-empirical study," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 7(3), pages 309-342, August.
    18. Othmar M. Lehner, 2014. "The formation and interplay of social capital in crowdfunded social ventures," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 26(5-6), pages 478-499, August.
    19. Weisbrod, Burton A. & Dominguez, Nestor D., 1986. "Demand for collective goods in private nonprofit markets: Can fundraising expenditures help overcome free-rider behavior?," Journal of Public Economics, Elsevier, vol. 30(1), pages 83-96, June.
    20. Goran Calic & Elaine Mosakowski, 2016. "Kicking Off Social Entrepreneurship: How A Sustainability Orientation Influences Crowdfunding Success," Journal of Management Studies, Wiley Blackwell, vol. 53(5), pages 738-767, July.
    21. Pitschner, Stefan & Pitschner-Finn, Sebastian, 2014. "Non-profit differentials in crowd-based financing: Evidence from 50,000 campaigns," Economics Letters, Elsevier, vol. 123(3), pages 391-394.
    22. Kévin André & Sylvain Bureau & Arthur Gautier & Olivier Rubel, 2017. "Beyond the Opposition Between Altruism and Self-interest: Reciprocal Giving in Reward-Based Crowdfunding," Journal of Business Ethics, Springer, vol. 146(2), pages 313-332, December.
    23. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Noelia Salido-Andres & Marta Rey-Garcia & Luis Ignacio Alvarez-Gonzalez & Rodolfo Vazquez-Casielles, 2022. "When the winner takes it all: online campaign factors influencing the success of donation-based crowdfunding for charitable causes," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 19(4), pages 763-780, December.
    2. Agnieszka Szewczyk & Zbigniew Stempnakowski, 2021. "Social Energy as the Driving Force behind Crowdfunding—Analysis and Classification of Selected Attributes," Energies, MDPI, vol. 14(19), pages 1-32, September.
    3. Han-Chiang Ho & Candy Lim Chiu & Somkiat Mansumitrchai & Zhengqing Yuan & Nan Zhao & Jiajie Zou, 2021. "The Influence of Signals on Donation Crowdfunding Campaign Success during COVID-19 Crisis," IJERPH, MDPI, vol. 18(14), pages 1-25, July.
    4. Betty Purwandari & Latifatul Khairiyah & Mardiana Purwaningsih & Achmad Nizar Hidayanto & Nur Fitriah Ayuning Budi & Kongkiti Phusavat, 2023. "Why do people donate online? A perspective from dual credibility transfer," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 20(2), pages 393-425, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tanja Jovanović, 2019. "Crowdfunding: What Do We Know So Far?," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 1-25, February.
    2. Stefania Testa & Paolo Roma & Maria Vasi & Silvano Cincotti, 2020. "Crowdfunding as a tool to support sustainability‐oriented initiatives: Preliminary insights into the role of product/service attributes," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 530-546, February.
    3. Friedemann Polzin & Helen Toxopeus & Erik Stam, 2018. "The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders," Small Business Economics, Springer, vol. 50(2), pages 251-273, February.
    4. Bagheri, Afsaneh & Chitsazan, Hasti & Ebrahimi, Ashkan, 2019. "Crowdfunding motivations: A focus on donors' perspectives," Technological Forecasting and Social Change, Elsevier, vol. 146(C), pages 218-232.
    5. Andreas Hoegen & Dennis M. Steininger & Daniel Veit, 2018. "How do investors decide? An interdisciplinary review of decision-making in crowdfunding," Electronic Markets, Springer;IIM University of St. Gallen, vol. 28(3), pages 339-365, August.
    6. Messeni Petruzzelli, Antonio & Natalicchio, Angelo & Panniello, Umberto & Roma, Paolo, 2019. "Understanding the crowdfunding phenomenon and its implications for sustainability," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 138-148.
    7. Hadar Gafni & Marek Hudon & Anaïs Périlleux, 2021. "Business or Basic Needs? The Impact of Loan Purpose on Social Crowdfunding Platforms," Journal of Business Ethics, Springer, vol. 173(4), pages 777-793, November.
    8. Hörisch, Jacob & Tenner, Isabell, 2020. "How environmental and social orientations influence the funding success of investment-based crowdfunding: The mediating role of the number of funders and the average funding amount," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    9. Sven Siebeneicher & Ilker Yenice & Carolin Bock, 2022. "Financial-Return Crowdfunding for Energy and Sustainability in the German-Speaking Realm," Sustainability, MDPI, vol. 14(19), pages 1-23, September.
    10. Yasar, Burze & Sevilay Yılmaz, Işıl & Hatipoğlu, Nurullah & Salih, Aslıhan, 2022. "Stretching the success in reward-based crowdfunding," Journal of Business Research, Elsevier, vol. 152(C), pages 205-220.
    11. Wehnert, Peter & Baccarella, Christian V. & Beckmann, Markus, 2019. "In crowdfunding we trust? Investigating crowdfunding success as a signal for enhancing trust in sustainable product features," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 128-137.
    12. Penz, R. Frederic & Hörisch, Jacob & Tenner, Isabell, 2022. "Investors in environmental ventures want good money—and a clean conscience: How framing, interest rates, and the environmental impact of crowdlending projects influence funding decisions," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    13. Fang, Xing, 2022. "Why we hide good deeds? The selfless and anonymous donation behavior in crowdfunding," Technology in Society, Elsevier, vol. 71(C).
    14. Allison, Thomas H. & Davis, Blakley C. & Webb, Justin W. & Short, Jeremy C., 2017. "Persuasion in crowdfunding: An elaboration likelihood model of crowdfunding performance," Journal of Business Venturing, Elsevier, vol. 32(6), pages 707-725.
    15. Mahmood, Ammara & Luffarelli, Jonathan & Mukesh, Mudra, 2019. "What's in a logo? The impact of complex visual cues in equity crowdfunding," Journal of Business Venturing, Elsevier, vol. 34(1), pages 41-62.
    16. Bernardino, Susana & Freitas Santos, José & Oliveira, Sílvie, 2021. "The impact of social media and e-WOM on the success of reward-based crowdfunding campaigns," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    17. Carla Martínez-Climent & Ricardo Costa-Climent & Pejvak Oghazi, 2019. "Sustainable Financing through Crowdfunding," Sustainability, MDPI, vol. 11(3), pages 1-16, February.
    18. Stasik Agata & Wilczyńska Ewa, 2018. "How do we study crowdfunding? An overview of methods and introduction to new research agenda," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 26(1), pages 49-78, March.
    19. Laurell, Christofer & Sandström, Christian & Suseno, Yuliani, 2019. "Assessing the interplay between crowdfunding and sustainability in social media," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 117-127.
    20. W. Cai & F.H.J. Polzin & F.C. Stam, 2019. "Crowdfunding and Social Capital: A Systematic Literature Review," Working Papers 19-05, Utrecht School of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:14:y:2021:i:5:p:194-:d:543345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.