Why and When Entrepreneurs' Passion Affects Investors' Funding Decision

Abstract

Existing literature remains inconclusive on whether entrepreneurs' passion affects investors' decision to invest, and no research to our knowledge has examined its mechanisms and contingencies. Drawing on the interpersonal view of emotions as social information, we propose two mechanisms through which passion can have opposite effects on investors' intention to invest -- a positive effect due to an emotional contagion process, and a negative effect due to a negative inferential process. We further hypothesize that these mediating processes are moderated by entrepreneurs' perspective taking and expertise. We tested this moderated mediation model in the context of crowdfunding, an increasingly important funding source for early stage ventures. Using a sample of technology and product design ventures from Kickstarter, the largest crowdfunding platform, we conducted a survey and found support for our hypotheses. We discuss the implications of these findings for theory and practice.