What Consumption Values Drive Crowdfunders to Support a Project?

Jan. 18, 2022

News
Faculty Research

Chances are you’ve seen a crowdfunding project on Indiegogo, Kickstarter or GoFundMe. Maybe you’ve even decided to back a venture on one of these platforms. What exactly motivates people to give to a certain project? New Eller research strives to answer that question.

Lusi Yang, assistant professor of management information systems in the Eller College of Management, noted that much of the prior research in the field explores either “what a project can offer” or “why crowdfunders back a project.” But her research investigated the connection between these two by developing a value-based view to systematically theorize the underlying mechanisms through which different project offerings, respectively and jointly, incentivize crowdfunders to back a project.

To start, considering the multidimensional values pursued by consumers, the researchers pinpointed three unique values that propel crowdfunders to contribute to a project: utilitarian, socioemotional and participatory.

Utilitarian value means that a backer “supported the project because they want to receive the actual product due to its functional benefits—be it a laptop stand or a video game”, says Yang. Socioemotional value is the extent to which a reward can meet funders’ emotional needs like a sense of belonging. For instance, a product developer may create and send a funder a specific thank you note. “Participatory value is when backers are invited to participate in the development of a project,” says Yang.

Taken together, the impact of these values has an inverted U-shaped effect on a project’s performance, according to the research, in that crowdfunders may prioritize various consumption values differently. If, for example, a project is low on all three values, it is likely to have a low performance. But if one value is already high, overly increasing the other two values may cause the project to be less effective in enhancing crowdfunding. It could even make the overall project more costly.

“Normally we think, ‘The more the merrier,’ but that is not necessarily the case here,” says Yang.

The research has implications on various fields, from crowdfunding to entrepreneurship to venture financing. While prior research zeroed in on how the economic conditions or educational backgrounds of entrepreneurs affected their decision to invest in a product, this paper notes that subjective components—like socioemotional value—also play a role in such choices.

The paper, titled “How Rewarding Are Your Rewards? A Value-Based View of Crowdfunding Rewards and Crowdfunding Performance,” appears in Entrepreneurship Theory and Practice.