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Success factors and complex dynamics of crowdfunding: An empirical research on Taobao platform in China

Author

Listed:
  • Kefan Xie

    (Wuhan University of Technology)

  • Zimei Liu

    (Wuhan University of Technology)

  • Long Chen

    (Wuhan University)

  • Weiyong Zhang

    (Old Dominion University)

  • Sishi Liu

    (Wuhan University of Technology)

  • Sohail S. Chaudhry

    (Villanova University)

Abstract

In recent years, as a novel financing mechanism, crowdfunding has gained popularity worldwide. In China, Crowdfunding started in 2011 and has experienced extremely fast growth since then. Several studies have identified success factors for crowdfunding. While these studies help infer the dynamics of crowdfunding, such dynamics have not been sufficiently examined, particularly by large-scale empirical studies. In addition, the relationship between crowdfunding market characteristics and project funding success remains fuzzy. In this research, we first empirically assessed the effect of crowdfunding success factors using a large sample (N = 5128) collected from Taobao.com , a leading crowdfunding platform in China. Built upon these factors, we conducted a multi-period, multi-party simulation study that evaluate crowdfund raisers’ project positioning decisions and investors’ project funding decision in a massive market. In the simulation study, we varied market characteristics such as the number of projects, number of investors per project, entrepreneurs’ moral risk, and ratio of community over financial benefits, to observe their effect on participants’ decisions and consequently, project funding success rate. Results reveal that dynamics of a crowdfunding market are rather complex. These insights contribute to a more in-depth theoretical understanding of crowdfunding, as well as provide useful guidance for crowdfund raisers, investors, and administrators.

Suggested Citation

  • Kefan Xie & Zimei Liu & Long Chen & Weiyong Zhang & Sishi Liu & Sohail S. Chaudhry, 2019. "Success factors and complex dynamics of crowdfunding: An empirical research on Taobao platform in China," Electronic Markets, Springer;IIM University of St. Gallen, vol. 29(2), pages 187-199, June.
    • Handle: RePEc:spr:elmark:v:29:y:2019:i:2:d:10.1007_s12525-018-0305-6
    DOI: 10.1007/s12525-018-0305-6
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    References listed on IDEAS

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    1. Denis Frydrych & Adam J. Bock & Tony Kinder & Benjamin Koeck, 2014. "Exploring entrepreneurial legitimacy in reward-based crowdfunding," Venture Capital, Taylor & Francis Journals, vol. 16(3), pages 247-269, July.
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    9. Andrea S. Funk, 2016. "Institutions Influencing the Evolution of Crowdfunding in China: A Review of the World Bank Report on Crowdfunding’s Potential for the Developing World," FGF Studies in Small Business and Entrepreneurship, in: Dennis Brüntje & Oliver Gajda (ed.), Crowdfunding in Europe, edition 1, pages 125-131, Springer.
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    Citations

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    Cited by:

    1. Yaokuang Li & Junjuan Du, 2020. "What drives the rapid achievement of a funding target in crowdfunding? Evidence from China," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(6), pages 269-277.
    2. V. Yu. Anikin & O. Yu. Patlasov, 2022. "Analysis of crowdfunding business models: key advantages of crowdfunding platforms," Russian Journal of Social Sciences and Humanities, Omsk Humanitarian Academy, vol. 16(4), pages 177-187, December.
    3. Legenzova Renata & Leckė Gintarė, 2022. "Exploring Lithuanian Real Estate Crowdfunding Investors’ Rationality," Management of Organizations: Systematic Research, Sciendo, vol. 87(1), pages 83-102, June.
    4. T.B. Zambalaeva, 2020. "Research of Factors of Successful Crowfunding Finance on the Example of the Russian Boomstarter Platform," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 19(3), pages 398-412.
    5. Xiongfei Cao & Sohail Chaudhry & Li Xu, 2019. "Electronic markets in emerging markets," Electronic Markets, Springer;IIM University of St. Gallen, vol. 29(2), pages 151-152, June.
    6. Han-Chiang Ho & Candy Lim Chiu & Somkiat Mansumitrchai & Zhengqing Yuan & Nan Zhao & Jiajie Zou, 2021. "The Influence of Signals on Donation Crowdfunding Campaign Success during COVID-19 Crisis," IJERPH, MDPI, vol. 18(14), pages 1-25, July.
    7. Rainer Alt, 2020. "Electronic Markets on sustainability," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(4), pages 667-674, December.
    8. Kalanit Efrat & Shaked Gilboa, 2020. "Relationship approach to crowdfunding: how creators and supporters interaction enhances projects’ success," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(4), pages 899-911, December.

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    More about this item

    Keywords

    China; Crowdfunding; Electronic markets; Computer simulation; Success factors; Complex dynamics;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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