Abstract

Research has shown the importance of signaling in determining crowdfunding outcomes (Wang et al., 2021), and have highlighted the complementary (Steigenberger and Wilhelm, 2018) and substitutive (Courtney et al., 2017, Wang et al., 2021) effects of different crowdfunding signaling mechanisms. For instance, they have shown that while rhetorical signals increase the effect of substantive signals on backers' financial contributions (Steigenberger and Wilhelm, 2018), creator signals like past success decrease the effect of media (videos and images) on future crowdfunding success (Courtney et al., 2017). Although our understanding of various signaling mechanisms on crowdfunding outcomes has significantly increased, it is still not complete. We are still not clear on how potentially negative signals from a prior poor performance, particularly failure, affect the effectiveness of signaling mechanisms employed in a later crowdfunding campaign. Moreover, failure is often associated with a negative stigma (Semadeni et al., 2008) and could potentially alter how contributors respond to a later crowdfunding campaign or the signals used in it. One characteristic of failure that may particularly affect how much stigma it attracts, and perhaps how it affects signals in later crowdfunding, is how severe it is. The severity of failure has been shown to influence later crowdfunding outcomes (Soublière and Gehman, 2020), and we argue that the severity of past failures may affect the effectiveness of different signaling mechanisms in a later crowdfunding campaign. We intend to investigate how the severity of prior failure affects the effectiveness of two key signaling mechanisms in crowdfunding: creator-controlled (e.g., rhetorical signals) and non-creator-controlled (e.g., endorsements) signals. We expect that the differing nature of creator-controlled and non-creator-controlled signals may entail that the severity of past failures affects the effectiveness of these signals in a later crowdfunding campaign in different ways. Our analysis will be based on a dataset collected from Kickstarter. We intend to contribute to both the signaling and crowdfunding literature, and to provide some practical insights to failed creators on how their past failure affects the effectiveness of the signaling mechanisms that they use in their subsequent attempts.

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