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Limited Availability in Crowdfunding Projects – Guarantee for Profitability

Author

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  • Alexander Fox

    (Ilmenau University of Technology, Germany)

  • Jana Neuland

    (Ilmenau University of Technology, Germany)

Abstract

Scarcity is an instrument that is often used in crowdfunding. Crowdfunding is an alternative form of financing, especially for entrepreneurs in the early-stage development phase. This paper deals with the characteristics of profitable crowdfunding projects. Hereby, we examine the impact factors of crowdfunding’s profitability, with a special focus on limited availability (scarcity), depth of project description and the size of pledging goals as follows. Therefore, we analyze data from kickstarter.com, one of the world’s largest crowdfunding platforms, and used 494 projects and 4,224 pledge levels from the broad category technology as our database. Technology projects lend themselves particularly well to the study, as they usually contain the project result as a tangible return, thus facilitating or even enabling the monetary evaluation of the success in contrast to, for example, cultural projects. Hence, our sample includes 32% of pledge levels with limited availability. We provide empirical evidence that the limited availability in the crowdfunding projects in terms of scarcity management is positively related to the profitability of the included pledge levels. We conclude that crowdfunding projects with limited availability on pledge levels are more profitable for investors.

Suggested Citation

  • Alexander Fox & Jana Neuland, 2020. "Limited Availability in Crowdfunding Projects – Guarantee for Profitability," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(4), pages 246-260.
    • Handle: RePEc:ejn:ejefjr:v:8:y:2020:i:4:p:246-260
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    References listed on IDEAS

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