IDEAS home Printed from https://ideas.repec.org/a/spr/joamsc/v51y2023i2d10.1007_s11747-022-00871-w.html
   My bibliography  Save this article

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

Author

Listed:
  • Yufei Zhang

    (University of Alabama at Birmingham)

  • Thomas E. DeCarlo

    (University of Alabama at Birmingham)

  • Andrew S. Manikas

    (University of Louisville)

  • Abhi Bhattacharya

    (University of Alabama)

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.

Suggested Citation

  • Yufei Zhang & Thomas E. DeCarlo & Andrew S. Manikas & Abhi Bhattacharya, 2023. "To exploit or explore? The impact of crowdfunding project descriptions and backers’ power states on funding decisions," Journal of the Academy of Marketing Science, Springer, vol. 51(2), pages 444-462, March.
  • Handle: RePEc:spr:joamsc:v:51:y:2023:i:2:d:10.1007_s11747-022-00871-w
    DOI: 10.1007/s11747-022-00871-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11747-022-00871-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s11747-022-00871-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. James G. March, 1991. "Exploration and Exploitation in Organizational Learning," Organization Science, INFORMS, vol. 2(1), pages 71-87, February.
    2. 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.
    3. Gordon Burtch & Anindya Ghose & Sunil Wattal, 2015. "The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment," Management Science, INFORMS, vol. 61(5), pages 949-962, May.
    4. Mi (Jamie) Zhou & Baozhou Lu & Weiguo (Patrick) Fan & G. Alan Wang, 2018. "Project description and crowdfunding success: an exploratory study," Information Systems Frontiers, Springer, vol. 20(2), pages 259-274, April.
    5. Sewaid, Ahmed & Parker, Simon C. & Kaakeh, Abdulkader, 2021. "Explaining serial crowdfunders' dynamic fundraising performance," Journal of Business Venturing, Elsevier, vol. 36(4).
    6. Parhankangas, Annaleena & Renko, Maija, 2017. "Linguistic style and crowdfunding success among social and commercial entrepreneurs," Journal of Business Venturing, Elsevier, vol. 32(2), pages 215-236.
    7. Mingfeng Lin & Siva Viswanathan, 2016. "Home Bias in Online Investments: An Empirical Study of an Online Crowdfunding Market," Management Science, INFORMS, vol. 62(5), pages 1393-1414, May.
    8. Tingting Fan & Leilei Gao & Yael Steinhart & Darren W Dahl & J Jeffrey Inman & L J Shrum, 2020. "The Small Predicts Large Effect in Crowdfunding," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 47(4), pages 544-565.
    9. Brett W. Josephson & Jean L. Johnson & Babu John Mariadoss, 2016. "Strategic marketing ambidexterity: antecedents and financial consequences," Journal of the Academy of Marketing Science, Springer, vol. 44(4), pages 539-554, July.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. David Dubois & Derek D. Rucker & Adam D. Galinsky, 2011. "Generous Paupers and Stingy Princes: Power Drives Consumer Spending on Self versus Others," Post-Print hal-00621230, HAL.
    12. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
    13. Derek D. Rucker & David Dubois & Adam D. Galinsky, 2011. "Generous Paupers and Stingy Princes: Power Drives Consumer Spending on Self versus Others," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(6), pages 1015-1029.
    14. Bi, Sheng & Liu, Zhiying & Usman, Khalid, 2017. "The influence of online information on investing decisions of reward-based crowdfunding," Journal of Business Research, Elsevier, vol. 71(C), pages 10-18.
    15. Gordon Burtch & Anindya Ghose & Sunil Wattal, 2013. "An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets," Information Systems Research, INFORMS, vol. 24(3), pages 499-519, September.
    16. Mikael Holmqvist, 2004. "Experiential Learning Processes of Exploitation and Exploration Within and Between Organizations: An Empirical Study of Product Development," Organization Science, INFORMS, vol. 15(1), pages 70-81, February.
    17. Derek D. Rucker & Adam D. Galinsky & David Dubois, 2012. "Power and consumer behavior: How power shapes who and what consumers value," Post-Print hal-00724231, HAL.
    18. Christina Guenther & Sofia Johan & Denis Schweizer, 2018. "Is the crowd sensitive to distance?—how investment decisions differ by investor type," Small Business Economics, Springer, vol. 50(2), pages 289-305, February.
    19. Daniele Leone & Francesco Schiavone & Luca Dezi, 2018. "Post-Campaign Operational Problems Hindering Promised Rewards in Crowdfunding Projects," Journal of Innovation Economics, De Boeck Université, vol. 0(2), pages 173-194.
    20. Kuppuswamy, Venkat & Bayus, Barry L., 2017. "Does my contribution to your crowdfunding project matter?," Journal of Business Venturing, Elsevier, vol. 32(1), pages 72-89.
    21. Fischer, Eileen & Rebecca Reuber, A., 2014. "Online entrepreneurial communication: Mitigating uncertainty and increasing differentiation via Twitter," Journal of Business Venturing, Elsevier, vol. 29(4), pages 565-583.
    22. Anna S. Cui & Fang Wu, 2016. "Utilizing customer knowledge in innovation: antecedents and impact of customer involvement on new product performance," Journal of the Academy of Marketing Science, Springer, vol. 44(4), pages 516-538, July.
    23. Diandian Xiang & Leinan Zhang & Qiuyan Tao & Yonggui Wang & Shuang Ma, 2019. "Informational or emotional appeals in crowdfunding message strategy: an empirical investigation of backers’ support decisions," Journal of the Academy of Marketing Science, Springer, vol. 47(6), pages 1046-1063, November.
    24. Derek D. Rucker & Adam D. Galinsky, 2008. "Desire to Acquire: Powerlessness and Compensatory Consumption," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 35(2), pages 257-267, April.
    25. Frank T. Rothaermel & David L. Deeds, 2004. "Exploration and exploitation alliances in biotechnology: a system of new product development," Strategic Management Journal, Wiley Blackwell, vol. 25(3), pages 201-221, March.
    26. Philipp B. Cornelius & Bilal Gokpinar, 2020. "The Role of Customer Investor Involvement in Crowdfunding Success," Management Science, INFORMS, vol. 66(1), pages 452-472, January.
    27. Dahee Han & Ashok K. Lalwani & Adam Duhachek, 2017. "Power Distance Belief, Power, and Charitable Giving," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 44(1), pages 182-195.
    28. Juha Uotila & Markku Maula & Thomas Keil & Shaker A. Zahra, 2009. "Exploration, exploitation, and financial performance: analysis of S&P 500 corporations," Strategic Management Journal, Wiley Blackwell, vol. 30(2), pages 221-231, February.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Chan, Ho Fai & Moy, Naomi & Schaffner, Markus & Torgler, Benno, 2021. "The effects of money saliency and sustainability orientation on reward based crowdfunding success," Journal of Business Research, Elsevier, vol. 125(C), pages 443-455.
    3. Felipe, Israel José dos Santos & Mendes-Da-Silva, Wesley & Leal, Cristiana Cerqueira & Braun Santos, Danilo, 2022. "Reward crowdfunding campaigns: Time-to-success analysis," Journal of Business Research, Elsevier, vol. 138(C), pages 214-228.
    4. Tafesse, Wondwesen, 2021. "Communicating crowdfunding campaigns: How message strategy, vivid media use and product type influence campaign success," Journal of Business Research, Elsevier, vol. 127(C), pages 252-263.
    5. Yan Lin & Wai Fong Boh, 2020. "How different Are crowdfunders? Examining archetypes of crowdfunders," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 71(11), pages 1357-1370, November.
    6. Ferrer, José María & Ulrich, Klaus & Blanco-González-Tejero, Cristina & Caño-Marín, Enrique, 2023. "Investors’ confidence in the crowdlending platform and the impact of Covid-19," Journal of Business Research, Elsevier, vol. 155(PA).
    7. Xiaobei Liang & Xiaojuan Hu & Jiang Jiang, 2020. "Research on the Effects of Information Description on Crowdfunding Success within a Sustainable Economy—The Perspective of Information Communication," Sustainability, MDPI, vol. 12(2), pages 1-36, January.
    8. Frimpong, Bright & Mohammed, Fatima & Larson, Keri M. & Anderson Junior, Henry, 2024. "Take my word for it! The role of projected certainty signaling and certainty alignment in reward crowdfunding outcomes," Journal of Business Venturing Insights, Elsevier, vol. 21(C).
    9. Boudreau, Kevin J. & Jeppesen, Lars Bo & Reichstein, Toke & Rullani, Francesco, 2021. "Crowdfunding as Donations to Entrepreneurial Firms," Research Policy, Elsevier, vol. 50(7).
    10. Appio, Francesco Paolo & Leone, Daniele & Platania, Federico & Schiavone, Francesco, 2020. "Why are rewards not delivered on time in rewards-based crowdfunding campaigns? An empirical exploration," Technological Forecasting and Social Change, Elsevier, vol. 157(C).
    11. Yuho Chung & Yiwei Li & Jianmin Jia, 2021. "Exploring embeddedness, centrality, and social influence on backer behavior: the role of backer networks in crowdfunding," Journal of the Academy of Marketing Science, Springer, vol. 49(5), pages 925-946, September.
    12. Chan, C.S. Richard & Parhankangas, Annaleena & Sahaym, Arvin & Oo, Pyayt, 2020. "Bellwether and the herd? Unpacking the u-shaped relationship between prior funding and subsequent contributions in reward-based crowdfunding," Journal of Business Venturing, Elsevier, vol. 35(2).
    13. Swati Gupta & Sahil Raj & Sanjay Gupta & Ajay Sharma, 2023. "Prioritising crowdfunding benefits: a fuzzy-AHP approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(1), pages 379-403, February.
    14. Thomas Clauss & Thomas Niemand & Sascha Kraus & Patrick Schnetzer & Alexander Brem, 2019. "Increasing Crowdfunding Success Through Social Media: The Importance Of Reach And Utilisation In Reward-Based Crowdfunding," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-30, May.
    15. Su, Linlin & Cheng, Xusen & Hua, Ying & Zhang, Wenping, 2021. "What leads to value co-creation in reward-based crowdfunding? A person-environment fit perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    16. Sardar Muhammad Usman & Farasat Ali Shah Bukhari & Muhammad Usman & Daniel Badulescu & Muhammad Safdar Sial, 2019. "Does the Role of Media and Founder’s Past Success Mitigate the Problem of Information Asymmetry? Evidence from a UK Crowdfunding Platform," Sustainability, MDPI, vol. 11(3), pages 1-24, January.
    17. Sewaid, Ahmed & Parker, Simon C. & Kaakeh, Abdulkader, 2021. "Explaining serial crowdfunders' dynamic fundraising performance," Journal of Business Venturing, Elsevier, vol. 36(4).
    18. Markus Weinmann & Abhay Nath Mishra & Lena Franziska Kaiser & Jan vom Brocke, 2023. "The Attraction Effect in Crowdfunding," Information Systems Research, INFORMS, vol. 34(3), pages 1276-1295, September.
    19. Zhao, Liang & Shneor, Rotem & Sun, Zhe, 2022. "Skin in the game: Self-funding and reward crowdfunding success," Business Horizons, Elsevier, vol. 65(1), pages 89-100.
    20. Li Yan & Hean Tat Keh & Xiaoyu Wang, 2021. "Powering Sustainable Consumption: The Roles of Green Consumption Values and Power Distance Belief," Journal of Business Ethics, Springer, vol. 169(3), pages 499-516, March.

    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:spr:joamsc:v:51:y:2023:i:2:d:10.1007_s11747-022-00871-w. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.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.