Legitimacy and Reciprocal Altruism in Donation-Based Crowdfunding: Evidence from India

Indu Khurana

doi:10.3390/jrfm14050194

Abstract

The donation-based crowdfunding platforms witness a mix of different entities seeking funding for numerous campaigns, adding complexities in understanding the donor behavior and factors that motivate donation. This study builds upon the economic theory of charitable giving and examines the ethical dilemma that donors face during the selection process. Using the data from Ketto.org, the biggest crowdfunding platform in India, this paper investigates the rank-order preference of donors while making a selection across heterogeneous entities and campaigns. The results show that campaigns run by non-profit organizations registered with causes that qualify for a tax-deduction receive a higher level of funding. Donors then fund unregistered non-profit organizations, followed by campaigns run by individuals. Demonstrating legitimacy by using subtle cues, like tagging “with tax-benefit,” motivates the donors to provide a higher amount of funding.

Highlights

Crowdfunding has emerged as one of the dominant forms of financing new campaigns and has gained legitimacy across the globe as a worldwide phenomenon (Alegre and Moleskis 2019; Frydrych et al 2014)
Similar to the results provided by other studies on donation-based crowdfunding, children’s health receives higher funding than adult health and children’s education (Ly and Mason 2012; Saxton and Wang 2014)
Donors collectively shape the financial landscape for charitable campaigns and direct the aid in specific sectors and to certain crowdfunding platforms that they believe have the most potential (Ly and Mason 2012)

Summary

Introduction

Crowdfunding has emerged as one of the dominant forms of financing new campaigns and has gained legitimacy across the globe as a worldwide phenomenon (Alegre and Moleskis 2019; Frydrych et al 2014). The research has advanced more in exploring patterns and factors that impact the success of reward-based crowdfunding platforms, including debt and equity models There is comparatively little work that examines which factors motivate donors to give money to donation-based crowdfunding models (Calic and Mosakowski 2016; Lehner and Nicholls 2014; Lehner 2013, 2014; Saxton and Wang 2014). The literature on the economic theory of charitable giving provides evidence that donors consider various factors before making a charitable donation, including the credibility, mission, and accountability of the fund-seeking entity in the marketplace (Ottoni-Wilhelm et al 2017; Vesterlund 2006). The literature on the economic theory of charitable giving provides evidence that donors consider various factors before making a charitable donation, including the credibility, mission, and accountability of the fund-seeking entity in the marketplace (Ottoni-Wilhelm et al 2017; Vesterlund 2006). Rose-Ackerman (1996) examines the link between donor’s motivation in charitable giving and the structure of the entity seeking funds and inquires, “does organizational form determine behavior, or does it provide a flexible structure that can accommodate a wide range of human objectives?” (p. 723)

Methods

Results

Discussion

Conclusion