Start Date
10-12-2017 12:00 AM
Description
Crowdfunding aims to collect small investments from a large crowd to support a project by fundraisers. Motivated by the observation that crowdfunding projects often attract a small number of backers, this study examines the role of the lottery—a novel mechanism used to attract backers in crowdfunding platforms—in three key crowdfunding outcomes (total number of backers, total money raised, probability of reaching the funding goal). Using data from a reward-based crowdfunding platform, we show that although the lottery does help attract a higher number of backers, it reduces the total money raised and the probability of reaching the funding goal. Our study contributes to the crowdfunding literature by both confirming the positive role of the lottery in backing engagement and demonstrating its overall negative role in crowdfunding success. Managerial implications for fundraisers and crowdfunding platforms are discussed.
Recommended Citation
Zheng, Zuyin (Alvin); Gong, Jing; and Pavlou, Paul, "Investing or Gambling? Empirical Evidence on the Role of the Lottery in Reward-based Crowdfunding Platforms" (2017). ICIS 2017 Proceedings. 22.
https://aisel.aisnet.org/icis2017/Peer-to-Peer/Presentations/22
Investing or Gambling? Empirical Evidence on the Role of the Lottery in Reward-based Crowdfunding Platforms
Crowdfunding aims to collect small investments from a large crowd to support a project by fundraisers. Motivated by the observation that crowdfunding projects often attract a small number of backers, this study examines the role of the lottery—a novel mechanism used to attract backers in crowdfunding platforms—in three key crowdfunding outcomes (total number of backers, total money raised, probability of reaching the funding goal). Using data from a reward-based crowdfunding platform, we show that although the lottery does help attract a higher number of backers, it reduces the total money raised and the probability of reaching the funding goal. Our study contributes to the crowdfunding literature by both confirming the positive role of the lottery in backing engagement and demonstrating its overall negative role in crowdfunding success. Managerial implications for fundraisers and crowdfunding platforms are discussed.