Winner Takes All? The 'Blockbuster Effect' in Crowdfunding Platforms

Abstract

Crowdfunding has gained momentum in recent years. Even though an increasing amount of research has been devoted to the economic value of crowdfunding marketplaces, the interactions and effects among crowdfunding have yet to be fully studied. The current study strives to bridge this gap by examining the impacts of projects – i.e., overwhelmingly successful – on the crowdfunding platform. Hypotheses are formulated based on the theory of network effects. Our preliminary results suggest the blockbuster exhibit positive spill-over effects within project category but cannibalization effects across categories. We also find evidence of lasting positive/negative network externality within/across category/categories. Further analysis suggests that fresh backers who are attracted to the platform by the blockbuster tend to be more engaged and more active. Our research aims to extend the emergent crowdfunding literature by examining network externalities among projects. We also provide practical implications for project creators and platform administrators.