How to Tell the Timelines? Exploring the Role of Rhetorical Signals in Crowdfunding

Abstract

Information asymmetry is a common phenomenon in entrepreneurship, and existing research and practice have proved signal theory effective. However, we notice the contradiction between traditional signal theory and management research. The former believes that low-cost rhetorical signals are invalid, while the latter suggests that entrepreneurs’ linguistic style affects how investors evaluate the firm value. Besides, the assumption that signals are isolated in traditional signal theory has also been challenged by complex environments. To fulfill these gaps, based on a reward-based crowdfunding environment with high uncertainty and high noise, we analyze 20,090 technology projects on Kickstarter from 2009 to 2018 and focus on timeline signals. The results show that rhetorical signal is valid in this environment, and the strength and validity are in an inverted-U shaped relationship. A too weak and too strong signal may lose its validity. Moreover, we adopt signal portfolios and study the joint effect of substantive and rhetorical signals. We find that substantive signals affect the validity of rhetorical signals, and whether the validity is enhanced or weakened depends on the effect of the substantive signals. Our findings contribute to the signal theory, entrepreneurship research, and crowdfunding.