Location
260-055, Owen G. Glenn Building
Start Date
12-15-2014
Description
Observational learning and word-of-mouth are frequently confounded in online settings. Consumers purchase a product, enjoy it, and then refer others. In parallel, referral recipients observe a transmitter's interaction with the product and draw inferences about product quality. We aim to tease these effects apart using data on 42,000+ peer referrals at a leading crowdfunding platform. Our identification comes from the fact that referral transmitters can choose to conceal their prior contributions from public view, making observational learning impossible. We show that referrals are 30% more effective when the transmitter's past contributions are publicly visible. Moreover, visible prior contributions drive referral recipients to convert more quickly. Acknowledging the potential endogeneity of the referrer’s decision to conceal contributions, we demonstrate the robustness of our results following propensity score matching and discuss the implications for crowdfunding and WOM referrals.
Recommended Citation
Burtch, Gordon; Ghose, Anindya; and Wattal, Sunil, "An Empirical Examination of Peer Referrals in Online Crowdfunding" (2014). ICIS 2014 Proceedings. 52.
https://aisel.aisnet.org/icis2014/proceedings/EBusiness/52
An Empirical Examination of Peer Referrals in Online Crowdfunding
260-055, Owen G. Glenn Building
Observational learning and word-of-mouth are frequently confounded in online settings. Consumers purchase a product, enjoy it, and then refer others. In parallel, referral recipients observe a transmitter's interaction with the product and draw inferences about product quality. We aim to tease these effects apart using data on 42,000+ peer referrals at a leading crowdfunding platform. Our identification comes from the fact that referral transmitters can choose to conceal their prior contributions from public view, making observational learning impossible. We show that referrals are 30% more effective when the transmitter's past contributions are publicly visible. Moreover, visible prior contributions drive referral recipients to convert more quickly. Acknowledging the potential endogeneity of the referrer’s decision to conceal contributions, we demonstrate the robustness of our results following propensity score matching and discuss the implications for crowdfunding and WOM referrals.