Abstract
PurposeThe paper is to explore crowdfunding success determinants from the reward menu design aspect, distinguishing from extant studies focusing on characteristics of project creators or crowdfunding projects and funding dynamics. Both the number of reward options and price differentiation of rewards are considered.Design/methodology/approachThe authors use the quadratic model to identify a curvilinear relationship between the number of reward options and crowdfunding success, by running regressions on data collected from one of the most influential reward-based crowdfunding platforms in China. In addition, they explore the moderating effect of price differentiation on the curvilinear relationship.FindingsThe authors find an inverted U-shape relationship between the number of reward options and the optimal number of options is around 10. In addition, they find that the curvilinear relationship is moderated by reward price differentiation.Practical implicationsThis paper has managerial implications for crowdfunding project creators and platform managers. To achieve better crowdfunding outcomes, a proper number of reward options with diversified reward prices should be provided.Originality/valueThe paper contributes to the literatures in antecedents of crowdfunding success from reward menu design aspect based on theories in investment and purchasing decision making. It is different from existing studies focusing on the characteristics of project creators and crowdfunding projects or funding dynamics. It also parallels retirement contribution plan design studies by exploring the reward menu design in the crowdfunding context.
Highlights
Crowdfunding has become an important alternative financial approach for small entrepreneurs and medium-sized firms
In Hypothesis 1, we argue that the inverted u-shaped relationship between crowdfunding success and the number of reward options is caused by the tradeoffs between the marginal benefits and costs of additional alternative
Empirical methodology and variables 5.1 Curvilinear relationship between crowdfunding success and the number of reward options We use a binary variable to depict whether a project is successful in raising money or not
Summary
Crowdfunding has become an important alternative financial approach for small entrepreneurs and medium-sized firms. We use the following model to detect the moderating effect of funding scheme price differentiation on the curvilinear relationship between crowdfunding success and the number of reward options: Successi 1⁄4 β0 þ β1$Optionsi þ β2$Options2i þ β3$PriceDifferentiationi þ β4$PriceDifferentiationi$Optionsi þ β5$PriceDifferentiationi$Options2i þ γ$Project Atrributesi þ δ$Initiator Attributesi þ ζ$ProjectCategoryi þ η$StartMonthi þ θ$EndMonthi þ λ$Locationsi þ f$IDi þ ei (2). When we use the log of fulfillment ratio, total support amount, the log of the number of backers and the log of average support per backer as dependent variables separately, the coefficients in column (1) to (4) are qualitatively the same as the results in the main analysis, indicating that the inverted U-shaped pattern occurs in the relationships of the number of reward options with the four alternative variables. À1.594*** (0.375) À1.406* (0.633) À0.083 (0.287) À1.106* (0.456) À2.822*** (0.631) À3.510*** (1.065) À1.661*** (0.478) À2.008** (0.768)
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