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Talking about a revolution? Costly and costless signals and the role of innovativeness in equity crowdfunding

Author

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  • Francesca Di Pietro
  • Luca Grilli
  • Francesca Masciarelli

Abstract

Uncertainty and information asymmetries in crowdfunding can be reduced via the quality signals project proponents send to potential supporters. Drawing on signaling theory, this study analyzes how costly signals—venture’s statements about past achievements and results—and costless signals—venture’s statements about future plans and goals—influence crowdfunding performance. The results of a multimethod study of 597 UK equity crowdfunding campaigns suggest that only costly signals increase the amount raised through crowdfunding and that costless signals generally have a negative effect. However, for companies introducing radical innovations use of costless signals is not punished by the crowd.

Suggested Citation

  • Francesca Di Pietro & Luca Grilli & Francesca Masciarelli, 2023. "Talking about a revolution? Costly and costless signals and the role of innovativeness in equity crowdfunding," Journal of Small Business Management, Taylor & Francis Journals, vol. 61(2), pages 831-862, March.
    • Handle: RePEc:taf:ujbmxx:v:61:y:2023:i:2:p:831-862
    DOI: 10.1080/00472778.2020.1816435
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    Cited by:

    1. Boutouar, Yassine & La Rocca, Maurizio & La Rocca, Tiziana & D'Amico, Augusto, 2025. "The role of sustainability and high-tech sector affiliation in shaping equity crowdfunding success: An AI perspective," Finance Research Letters, Elsevier, vol. 77(C).
    2. Daniel Berliner & Rotem Shneor & Andreas Wald, 2025. "Beyond one-size-fits-all: Empirical evidence on the heterogeneity of equity crowdfunding investors’ decision drivers," Electronic Markets, Springer;IIM University of St. Gallen, vol. 35(1), pages 1-25, December.
    3. Mochkabadi, Kazem & Kleinert, Simon & Urbig, Diemo & Volkmann, Christine, 2024. "From distinctiveness to optimal distinctiveness: External endorsements, innovativeness and new venture funding," Journal of Business Venturing, Elsevier, vol. 39(1).
    4. Jinjuan Yang & Jiayuan Xin & Yan Zeng & Pei Jose Liu, 2025. "Signaling and perceiving on equity crowdfunding decisions — a machine learning approach," Small Business Economics, Springer, vol. 65(1), pages 315-356, June.
    5. Bottaro, Carlotta & Cesaroni, Fabrizio & Fasano, Mattia & Staglianò, Raffaele, 2025. "Innovation, team creativity, and intellectual property in equity crowdfunding: a fuzzy and disaggregated approach," Finance Research Letters, Elsevier, vol. 86(PG).
    6. Ivo Blohm & Moritz Schulz & Jan Marco Leimeister, 2024. "Hedonic Signals in Crowdfunding," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 66(6), pages 757-775, December.
    7. Adeniji, James & Essuman, Dominic & Olabode, Oluwaseun E., 2026. "Saying enough vs saying too much: Lessons on optimizing project risk description for crowdfunding success in developing countries," Technovation, Elsevier, vol. 149(C).
    8. Kgoroeadira, Reabetswe & Burke, Andrew & Di Pietro, Francesca & van Stel, André, 2023. "Determinants of firms’ default on unsecured loans in the P2P crowdfunding market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    9. Syed Muhammad Hamza Abid Wasti & Jaleel Ahmed & Mushtaq Hussain Khan, 2024. "Role of successive round as a quality signal in equity crowdfunding: Novel evidence from the perspective of investors’ preferences," PLOS ONE, Public Library of Science, vol. 19(3), pages 1-16, March.
    10. Simon Kleinert & Marie Hildebrand, 2025. "Venture Capitalists’ Decision-Making in Hot and Cold Markets: The Effect of Signals and Cheap Talk," Entrepreneurship Theory and Practice, , vol. 49(2), pages 571-598, March.

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