Community Impact on Crowdfunding Performance

Abstract

Many digital platforms, regardless of their business domain, follow the common practice of incorporating social and community features in order to increase their user engagement and expand their online community. Although this practice is advocated by the literature and clearly makes sense, its implications are not well understood. In this research, we aimed to close this literature gap, providing a theoretical framework and empirical evidence regarding the impact of the online community on platform performance. As a testbed, we studied crowdfunding platforms, that is, designated websites aimed at enabling entrepreneurs to raise money over the Internet. We used comprehensive data collected from Kickstarter, the largest crowdfunding platform established to date.We theorized that online platforms, such as Kickstarter, consist not of a single community but rather a hierarchy of multiple, partially competing communities. These communities vary considerably with respect to the interests of their members, their platform participation patterns, and their impact on platform performance. Our suggested framework incorporates the notion of fluidity of online communities; that is, online users and digital communities evolve and change over time. As the interests of the online user change, so does the membership of her immediate community. The proposed framework allows us to identify such community changes and, consequently, to better identify pivotal members of online communities and predict their lifetime value as potential backers.Empirically, we validated our theory by studying the participation patterns of over 6.3 million Kickstarter users, who have supported more than 150 thousand crowdfunding campaigns over more than 5 years. We demonstrated the growth of the different community types and estimated their different impacts on crowdfunding performance over time. Interestingly, we found that some communities, despite high participation rates, had negative impacts on crowdfunding campaign success. We discuss managerial and practical implications of our theory and findings.