IDEAS home Printed from https://ideas.repec.org/a/eee/jobuve/v21y2024ics2352673423000653.html
   My bibliography  Save this article

Crowdfunding and too much choice: A recipe for disappointment

Author

Listed:
  • Elitzur, Ramy
  • Muttath, Peri
  • Soberman, David

Abstract

In this study, we investigate the effects of reward options and their prices on crowdfunding success. Rational economics predicts that the more choice potential contributors have, the more likely it is that they find a reward option that stimulates participation. However, experiments in behavioral economics and marketing show that providing someone with excessive choice (overchoice) might adversely affect participation. Using data collected from Kickstarter, a well-known crowdfunding website, we demonstrate the existence of the overchoice phenomenon in the context of crowdfunding, i.e., an inverted U-shaped relationship between reward options and crowdfunding performance.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:jobuve:v:21:y:2024:i:c:s2352673423000653
    DOI: 10.1016/j.jbvi.2023.e00436
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2352673423000653
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbvi.2023.e00436?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. 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.
    2. Massimo G. Colombo & Chiara Franzoni & Cristina Rossi–Lamastra, 2015. "Internal Social Capital and the Attraction of Early Contributions in Crowdfunding," Entrepreneurship Theory and Practice, , vol. 39(1), pages 75-100, January.
    3. Dhar, Ravi, 1997. "Consumer Preference for a No-Choice Option," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(2), pages 215-231, September.
    4. Matthew Josefy & Thomas J. Dean & Lumina S. Albert & Markus A. Fitza, 2017. "The Role of Community in Crowdfunding Success: Evidence on Cultural Attributes in Funding Campaigns to “Save the Local Theaterâ€," Entrepreneurship Theory and Practice, , vol. 41(2), pages 161-182, March.
    5. Ajay Agrawal & Christian Catalini & Avi Goldfarb, 2015. "Crowdfunding: Geography, Social Networks, and the Timing of Investment Decisions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 253-274, June.
    6. Dmitri Kuksov & J. Miguel Villas-Boas, 2010. "When More Alternatives Lead to Less Choice," Marketing Science, INFORMS, vol. 29(3), pages 507-524, 05-06.
    7. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
    8. 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.
    9. 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..
    10. Massimo Colombo & Douglas Cumming & Silvio Vismara, 2016. "Governmental venture capital for innovative young firms," The Journal of Technology Transfer, Springer, vol. 41(1), pages 10-24, February.
    11. John T. Gourville & Dilip Soman, 2005. "Overchoice and Assortment Type: When and Why Variety Backfires," Marketing Science, INFORMS, vol. 24(3), pages 382-395, July.
    12. Anglin, Aaron H. & Wolfe, Marcus T. & Short, Jeremy C. & McKenny, Aaron F. & Pidduck, Robert J., 2018. "Narcissistic rhetoric and crowdfunding performance: A social role theory perspective," Journal of Business Venturing, Elsevier, vol. 33(6), pages 780-812.
    13. Michael Woodford, 2012. "Prospect Theory as Efficient Perceptual Distortion," American Economic Review, American Economic Association, vol. 102(3), pages 41-46, May.
    14. Silvio Vismara, 2018. "Information Cascades among Investors in Equity Crowdfunding," Entrepreneurship Theory and Practice, , vol. 42(3), pages 467-497, May.
    15. Benjamin Scheibehenne & Rainer Greifeneder & Peter M. Todd, 2010. "Can There Ever Be Too Many Options? A Meta-Analytic Review of Choice Overload," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(3), pages 409-425, October.
    16. 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.
    17. Vincenzo Butticè & Massimo G. Colombo & Mike Wright, 2017. "Serial Crowdfunding, Social Capital, and Project Success," Entrepreneurship Theory and Practice, , vol. 41(2), pages 183-207, March.
    18. Vitaly Skirnevskiy & David Bendig & Malte Brettel, 2017. "The Influence of Internal Social Capital on Serial Creators’ Success in Crowdfunding," Entrepreneurship Theory and Practice, , vol. 41(2), pages 209-236, March.
    19. 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.
    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. Christopher Courtney & Supradeep Dutta & Yong Li, 2017. "Resolving Information Asymmetry: Signaling, Endorsement, and Crowdfunding Success," Entrepreneurship Theory and Practice, , vol. 41(2), pages 265-290, March.
    22. Stephen J. Hoch & Eric T. Bradlow & Brian Wansink, 1999. "The Variety of an Assortment," Marketing Science, INFORMS, vol. 18(4), pages 527-546.
    23. Silvio Vismara, 2016. "Equity retention and social network theory in equity crowdfunding," Small Business Economics, Springer, vol. 46(4), pages 579-590, April.
    24. Chul Kim & P. K. Kannan & Michael Trusov & Andrea Ordanini, 2020. "Modeling Dynamics in Crowdfunding," Marketing Science, INFORMS, vol. 39(2), pages 339-365, March.
    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. 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).

    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. Shneor, Rotem & Zhao, Liang & Fabian Michael Goedecke, Jann, 2023. "On relationship types, their strength, and reward crowdfunding backer behavior," Journal of Business Research, Elsevier, vol. 154(C).
    2. Tajvarpour, Mohammad Hossein & Pujari, Devashish, 2022. "The influence of narrative description on the success of crowdfunding campaigns: The moderating role of quality signals," Journal of Business Research, Elsevier, vol. 149(C), pages 123-138.
    3. Swati Oberoi & Rohit Joshi & Atul Mehta & Smita Srivastava & Vishal K. Gupta, 2024. "Crowdfunding Research: Critical Analysis and Constructive Agenda for Future Inquiry," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 33(3), pages 651-699, August.
    4. 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.
    5. Vincenzo Butticè & Diego Useche, 2022. "Crowdfunding to overcome the immigrant entrepreneurs’ liability of outsidership: the role of internal social capital," Small Business Economics, Springer, vol. 59(4), pages 1519-1540, December.
    6. Sewaid, Ahmed & Parker, Simon C. & Kaakeh, Abdulkader, 2021. "Explaining serial crowdfunders' dynamic fundraising performance," Journal of Business Venturing, Elsevier, vol. 36(4).
    7. Lars Hornuf & Johannes Voshaar, 2024. "What Is an Effective Signal in Crowdfunding? Evidence from Expert Researchers and a Meta-Study," CESifo Working Paper Series 11501, CESifo.
    8. 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.
    9. Calic, Goran & Shevchenko, Anton, 2020. "How signal intensity of behavioral orientations affects crowdfunding performance: The role of entrepreneurial orientation in crowdfunding business ventures," Journal of Business Research, Elsevier, vol. 115(C), pages 204-220.
    10. 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.
    11. 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).
    12. Geiger, Mark, 2020. "A meta-analysis of the gender gap(s) in venture funding: Funder- and entrepreneur-driven perspectives," Journal of Business Venturing Insights, Elsevier, vol. 13(C).
    13. Elrashidy, Zeinab & Haniffa, Roszaini & Sherif, Mohamed & Baroudi, Sarra, 2024. "Determinants of reward crowdfunding success: Evidence from Covid-19 pandemic," Technovation, Elsevier, vol. 132(C).
    14. Alsagr, Naif & Cumming, Douglas J. & Davis, Justin G. & Sewaid, Ahmed, 2023. "Geopolitical risk and crowdfunding performance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    15. Cai, Wanxiang & Polzin, Friedemann & Stam, Erik, 2021. "Crowdfunding and social capital: A systematic review using a dynamic perspective," Technological Forecasting and Social Change, Elsevier, vol. 162(C).
    16. Fisch, Christian, 2019. "Initial coin offerings (ICOs) to finance new ventures," Journal of Business Venturing, Elsevier, vol. 34(1), pages 1-22.
    17. Yang, Jialiang & Li, Yaokuang & Calic, Goran & Shevchenko, Anton, 2020. "How multimedia shape crowdfunding outcomes: The overshadowing effect of images and videos on text in campaign information," Journal of Business Research, Elsevier, vol. 117(C), pages 6-18.
    18. Helen Bollaert & Gaël Leboeuf & Armin Schwienbacher, 2020. "The narcissism of crowdfunding entrepreneurs," Small Business Economics, Springer, vol. 55(1), pages 57-76, June.
    19. Berns, John P. & Jia, Yankun & Gondo, Maria, 2022. "Crowdfunding success in sustainability-oriented projects: An exploratory examination of the crowdfunding of 3D printers," Technology in Society, Elsevier, vol. 71(C).
    20. 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).

    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:eee:jobuve:v:21:y:2024:i:c:s2352673423000653. 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: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-business-venturing-insights .

    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.