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The value of backers’ word-of-mouth in crowdfunding projects filtering: an empirical investigation

Author

Listed:
  • Haichao Zheng

    (Southwestern University of Finance and Economics)

  • Zihao Qi

    (Southwestern University of Finance and Economics)

  • Xin Luo

    (University of New Mexico)

  • Liting Li

    (Southwestern University of Finance and Economics)

  • Bo Xu

    (Fudan University)

Abstract

The current study aims to investigate whether backers’ electronic word-of-mouth (eWOM) is a valuable input when it comes to generating collective intelligence for projects filtering in crowdfunding. Based on theories of collective intelligence and WOM, we developed a research model and conducted an empirical study using a cross-section dataset with 845 crowdfunding projects and a panel dataset of the funding dynamics of those projects. The results indicated that backers’ negative WOM rather than positive WOM can effectively predict project implementation performance. Besides, for entrepreneurs with a high reputation, negative WOM has stronger predictive power for the complaints of product quality. We also found that projects with more accumulated negative WOM tend to attract fewer subsequent backers. Compared with positive WOM, negative WOM has a stronger effect on subsequent investments in a crowdfunding project. Finally, positive WOM can reduce the diffusion of responsibility effect in crowdfunding, that is, a backer is less likely to take responsibility for investing in a project when others have already backed it. Based on these findings, we conclude that backers’ WOM, especially the negative WOM, contributes to projects filtering in crowdfunding.

Suggested Citation

  • Haichao Zheng & Zihao Qi & Xin Luo & Liting Li & Bo Xu, 2020. "The value of backers’ word-of-mouth in crowdfunding projects filtering: an empirical investigation," Electronic Commerce Research, Springer, vol. 20(4), pages 757-782, December.
    • Handle: RePEc:spr:elcore:v:20:y:2020:i:4:d:10.1007_s10660-018-9322-y
    DOI: 10.1007/s10660-018-9322-y
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    1. Mustafa Raza Rabbani & Abu Bashar & Iqbal Thonse Hawaldar & Muneer Shaik & Mohammed Selim, 2022. "What Do We Know about Crowdfunding and P2P Lending Research? A Bibliometric Review and Meta-Analysis," JRFM, MDPI, vol. 15(10), pages 1-23, October.
    2. Cuixia Jiang & Ranran Han & Qifa Xu, 2023. "The impact of social media input intensity on reward-based crowdfunding performance: evidence from China," Electronic Commerce Research, Springer, vol. 23(3), pages 1753-1774, September.

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