Why they Invest? A Qualitative Study of Trust Building and Evolution in Crowdfunding

Abstract

Being an emerging phenomenon, crowdfunding attracts great attention, but the reasons why people participate in the project are not fully understood. Especially in China, people do not trust each other. Systematic research is lacking, though, on why people trust the fund raisers and make investment decision. This research employs a qualitative approach, performing an in-depth analysis of a single case. Drawing on the perspective of identity orientation, we develop a process model that shows how investors trust has been formed and changed in different phases of crowdfunding. Through analysis of qualitative data, we found that fund raisers social network mobilization, third-party guarantee and media coverage all help to build the initial trust of investors, extending the scope of investors from a small circle of social connections to the general public. After the initial investment, investor's identity orientation moderates the relationship between project performance/interaction strategy and investor's trust. Linking the identity orientation and trust may improve on previous models of trust building and evolution by outlining a more dynamic perspective.