Social identity and signalling success factors in online crowdfunding

• Published in: Entrepreneurship and regional development Vol. 28; no. 9-10; pp. 605 - 629
• Main Authors: Kromidha, Endrit, Robson, Paul
• Format: Journal Article
• Language: English
• Published: Abingdon Routledge 01.12.2016; Taylor & Francis Ltd
• Subjects: Crowdfunding; Electronic commerce; Entrepreneurs; Entrepreneurship; entrepreneurship financing; signalling theory; Social identity; social identity theory; Social networks; Success factors
• ISSN: 0898-5626; 1464-5114
• DOI: 10.1080/08985626.2016.1198425

Online crowdfunding means relying on the Internet to seek financial support from the general public. In this paper, we examine success factors in the social capital networks of the top 5000 most funded projects in Kickstarter.com at the time of this study. We first look at how fundraisers and backers identify themselves with the projects they support in their own social networks. This is modelled using Facebook friends and Facebook shares, respectively, guided by social identity theory. Secondly, we use signalling theory to investigate crowdfunding success based on backers' and fundraisers' ability to engage in a forum, modelled using the number of comments between them, or with unilateral signals using the number of updates from the fundraiser. This study suggests that funders and backers who identify themselves with the projects in their own social networks are associated with greater pledge/backer ratio. We also find that projects where the fundraiser and its backers exchange more signals in a joint forum, but not signals delivered unilaterally by the fundraiser, have a greater pledge/backer ratio. These findings, based on a scalable quantitative study, highlight the importance of a multi-theory approach, advance social identity theory and signalling theory in the context of crowdfunding, and could be applied to online and normal entrepreneurship environments alike.