Resolving Information Asymmetry: Signaling, Endorsement, and Crowdfunding Success

This article draws on information economics to examine when signals and endorsements obtained from multiple information sources enhance or diminish one another's effects. We propose that signals through start–up actions (use of media) and characteristics (crowdfunding experience) can mitigate i...

Full description

Saved in:
Bibliographic Details
Published inEntrepreneurship theory and practice Vol. 41; no. 2; pp. 265 - 290
Main Authors Courtney, Christopher, Dutta, Supradeep, Li, Yong
Format Journal Article
LanguageEnglish
Published Los Angeles, CA SAGE Publications 01.03.2017
SAGE PUBLICATIONS, INC
Subjects
Crowdfunding
Endorsements
Entrepreneurial finance
Information
Startups
Studies
Online AccessGet full text

Cover

More Information
Summary:This article draws on information economics to examine when signals and endorsements obtained from multiple information sources enhance or diminish one another's effects. We propose that signals through start–up actions (use of media) and characteristics (crowdfunding experience) can mitigate information asymmetry concerns about project quality and founder credibility, enhancing the project's likelihood of attaining funding. Further, we posit that while start–up–originated signals offset each other's effects, third–party endorsements (sentiment expressed in backer comments) validate and complement start–up–originated signals. Empirical analyses based on a comprehensive dataset of crowdfunding projects on the Kickstarter website during 2009–2015 confirm our predictions.
ISSN:1042-2587
1540-6520
DOI:10.1111/etap.12267