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The Small Predicts Large Effect in Crowdfunding

Author

Listed:
  • Tingting Fan
  • Leilei Gao
  • Yael Steinhart
  • Darren W Dahl
  • J Jeffrey Inman
  • L J Shrum
Abstract
Entrepreneurs are increasingly relying on online crowdfunding—the use of online platforms to raise money from a large number of people—to finance their ventures. This research explores the proposition that the amounts contributed by the majority of funders in the early stages of a crowdfunding campaign may have a counterintuitive influence on follow-up contributions and on the campaign’s fundraising success. Findings from an analysis of real-world large-scale crowdfunding data and five experiments show that potential funders are more (vs. less) likely to contribute to a newly launched project when early contributions consist mainly of relatively small (vs. large) amounts. The results further show that this Small Predicts Large effect is driven by people’s relationship inferences: when contributions made at the early stages of a crowdfunding campaign mainly comprise relatively large amounts, consumers tend to infer that those large contributions were made by the entrepreneur’s friends or relatives. Because of this relationship inference, prospective funders perceive larger contributions as being less diagnostic of others’ true opinions of the project and this perception negatively affects their willingness to contribute. However, if a crowdfunding campaign provides sufficient justification for the early-stage large contributions, this Small Predicts Large effect will be eliminated.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:jconrs:v:47:y:2020:i:4:p:544-565.
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    File URL: http://hdl.handle.net/10.1093/jcr/ucaa013
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    Citations

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    Cited by:

    1. Elitzur, Ramy & Muttath, Peri & Soberman, David, 2024. "Crowdfunding and too much choice: A recipe for disappointment," Journal of Business Venturing Insights, Elsevier, vol. 21(C).
    2. Lukas Maier & Christian V. Baccarella & Jörn H. Block & Timm F. Wagner & Kai-Ingo Voigt, 2023. "The Legitimization Effect of Crowdfunding Success: A Consumer Perspective," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1389-1420, July.
    3. 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.
    4. Emanuel-Correia, Ricardo & Duarte, Fábio & Gama, Ana Paula Matias & Augusto, Mário, 2022. "Does peer-to-peer crowdfunding boost refugee entrepreneurs?," Finance Research Letters, Elsevier, vol. 46(PA).
    5. Hu, Peng & Gong, Yeming & Lu, Yaobin & Ding, Amy Wenxuan, 2023. "Speaking vs. listening? Balance conversation attributes of voice assistants for better voice marketing," International Journal of Research in Marketing, Elsevier, vol. 40(1), pages 109-127.
    6. Moldovan, Sarit & Shoham, Meyrav & Steinhart, Yael, 2023. "Sending mixed signals: How congruent versus incongruent signals of popularity affect product appeal," International Journal of Research in Marketing, Elsevier, vol. 40(4), pages 881-897.
    7. Junge, Louise Bech & Laursen, Iben Cleveland & Nielsen, Kristian Roed, 2022. "Choosing crowdfunding: Why do entrepreneurs choose to engage in crowdfunding?," Technovation, Elsevier, vol. 111(C).

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