Title: When Small Predicts Large: The Effect of Initial Small Donations on Subsequent Donations to a Crowdfunding Project
Speaker: Tingting Fan, The Chinese University of Hong Kong
Time: Wednesday, May 31, 13:30-15:00
Place: Room 217, Guanghua Building 2
Crowdfunding is becoming an increasingly popular means for entrepreneurs to raise capital through online platforms. When deciding whether to support a project, a potential backer evaluates the project not only based on information provided by the entrepreneur, but also based on the amount already invested in the project. Some research has suggested that larger contributions are likely to create donation momentum and elicit backers’ herding behavior (Agrawal, Catalini, and Goldfarb 2015). Accordingly, it is common for entrepreneurs to ask their friends or families to “seed” investments in the early stages of a crowdfunding project. But does this “friendship-giving” practice really benefit crowdfunding projects? Large-scale field data and lab experiments show that, contrary to this common practice, a large amount of initial contribution at the early stage of a crowdfunding project may impede rather than benefit the project. Instead, small initial contributions are more likely to attract following backers to contribute to the project. We suggest that this is because a potential backer will infer other backers’ behavioral intentions based on the amount they contributed to the project, which in turn determines the potential backer’s likelihood of following others.
Tingting Fan is an assistant professor at Department of Marketing, Business School of The Chinese University of Hong Kong. She got her Ph.D. from Stern School of Business, New York University in 2014. She got M.S. in Economics and B.A. in Business Administration at Peking University. Her research interest includes quantitative marketing, consumer experience with high-technology products and services, digital marketing (mobile phone, video games, and online social network), branding, and empirical IO (industrial organization). Her research has won research grants from Wharton Customer Analytics Initiative (WCAI), Marketing Science Institute (MSI), and Product Development Management Association (PDMA).
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