Showing off or showing impact? The joint signalling effect of reputation and accountability on social entrepreneurs’ crowdfunding success

Abstract

In the early stages of their ventures, social entrepreneurs often struggle to attract financing in traditional financial markets and therefore use new markets, such as crowdfunding platforms. Based on two experimental studies, I examine how two different signalling strategies—the social entrepreneur’s reputation (based on awards, fellowships, and prizes) and accountability (based on a social impact measurement system)—influence crowdfunders’ decisions when evaluating an early-stage social venture. In the first 2 × 2 between-subjects experiment, I find an interaction suggesting that accountability increases the funding amount provided by crowdfunders only when the social entrepreneur does not signal a strong reputation. In a follow-up 1 × 2 between-subjects experiment, I replicate the negative effect of reputation. However, based on qualitative data, I do not find that crowdfunders consciously evaluate reputation based on awards, fellowships, and prizes as a negative signal. Overall, the results suggest that signalling accountability based on implementing a social impact measurement system is a better strategy for crowdfunding campaigns than investing in reputation building or sending both signals simultaneously in the early stages of a social venture.