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Investor participation in reward-based crowdfunding: impacts of entrepreneur efforts, platform characteristics, and perceived value

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Abstract

Reward-based crowdfunding is an emerging business model whereby entrepreneurs raise money from several small investors. These investors, in turn, receive products/services as a reward. Investors’ participation is the key to success for this business model. We use the means-end theory to examine the success of the reward-based crowdfunding mechanism. We present an integrated model by considering two platform-based service attributes—platform characteristics (institutional mechanisms and information transparency) and entrepreneur efforts (content, embeddedness, and interaction)—and explore their influence on an investor’s perceived value (functional value, price value, emotional value, and social value), and participation intention. We test the model using survey data of 218 responses from 65 crowdfunding projects on a leading crowdfunding platform. The results show that all perceived values are positively associated with an investor’s future participation intention. An entrepreneur’s efforts to provide high-quality content and encourage interactions and the platform’s characteristics of institutional mechanisms improve an investor’s perceived functional, price, emotional, and social values. In addition, information transparency positively influences an investor’s perceived price, functional and emotional values. This study contributes to crowdfunding research by providing a comprehensive understanding of the success of a reward-based crowdfunding project. At the same time, the results of this study will be helpful for crowdfunding entrepreneurs and platforms.

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Funding

Funding was provided by National Natural Science Foundation of China (72172111); National Natural Science Foundation of China (71810107003).

Author information

Authors and Affiliations

  1. School of Management, Huazhong University of Science and Technology, Wuhan, 430074, China

    Fengjiao Zhang

  2. School of Management, Wuhan University of Science and Technology, Wuhan, 430081, China

    Hong Zhang

  3. Indian Institute of Management, Raipur, 492051, India

    Sumeet Gupta

Authors
  1. Fengjiao Zhang
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  2. Hong Zhang
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  3. Sumeet Gupta
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Correspondence to Hong Zhang.

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Appendices

Appendix A: Questionnaire items

Construct

Item

Content

CON1. Entrepreneur provides content that is relevant to crowdfunding projects

CON2. Entrepreneur provides credible information

CON3. Entrepreneur provides access to valuable information

CON4. Entrepreneur provides content that is useful

Embeddedness

EMB1. Entrepreneur seeks the opinion of members regarding community services

EMB2. Entrepreneur allows members to have direct contact with their representatives

EMB3. Entrepreneur makes an effort to make members feel a part of the community

Interaction

INT1. Entrepreneur encourages interactions among members

INT2. Entrepreneur strongly encourages information sharing among members

INT3. Entrepreneur encourages different members to share information

INT4. Overall, entrepreneur facilitates a lot of interactions among members

Institutional mechanisms

IME1. I am sure that I cannot be taken advantage of as a result of participating in online crowdfunding activities

IME2. I am confident that there are mechanisms on the crowdfunding platform to protect me against any potential risks if something goes wrong in the process of participation in crowdfunding activities

IME3. I feel confident that the institutional mechanisms of the crowdfunding platform give accurate information about the entrepreneur’s reputation and potential

IME4. I believe that the institutional mechanisms of the crowdfunding platform are effective

IME5. I believe that the institutional mechanisms of the crowdfunding platform are reliable and dependable

Information transparency

ITR1. The crowdfunding platform provides straightforward information that is utilized from entrepreneurs’ profiles

ITR2. The project-relevant information in terms of reward forms, crowdfunding processes, raised money and services outcomes is visible on the crowdfunding platform

ITR3. The crowdfunding platform presents privacy notices as well as terms and conditions of participation

Functional value

FUV1. The products or services offered by the entrepreneur will be well made or provided when the project is successful

FUV2. The products or services offered by the entrepreneur will have an acceptable standard of quality when the project is successful

FUV3. The products or services offered by the entrepreneur will be easy to use when the project is successful

Price value

PRV1. The products or services offered by the entrepreneur will be reasonably priced when the project is successful

PRV2. The products or services offered by the entrepreneur will be value for money when the project is successful

PRV3. The products or services offered by the entrepreneur will be good products or services for the price when the project is successful

Social Value

SOV1. My interactions on this crowdfunding community expand my personal/social network

SOV2. My interactions on this crowdfunding community enhance the strength of my affiliation with other participants

SOV3. My interactions on this crowdfunding community enhance my sense of belonging with this community

Emotional value

EMV1. Participating in this crowdfunding project is one that I will enjoy

EMV2. It will be a happy experience to participate in this crowdfunding

EMV3. Participating in this crowdfunding project will make me feel good

Intention of future participation

IFP1. I intend to further participate in this crowdfunding project

IFP2. The likelihood that I further participate in this crowdfunding project is very high

IFP3. I am interested to further participate in this crowdfunding project

Appendix B: Factor loading

Indicator

1

2

3

4

5

6

7

8

9

10

CON1

0.869

0.056

0.157

0.164

0.101

0.114

0.130

0.134

0.144

0.166

CON2

0.847

0.061

0.143

0.190

0.165

0.134

0.152

0.132

0.163

0.119

CON3

0.849

0.058

0.127

0.153

0.136

0.150

0.124

0.182

0.173

0.144

CON4

0.879

0.063

0.150

0.159

0.133

0.139

0.100

0.113

0.188

0.137

EMB1

0.027

0.901

0.089

0.020

− 0.043

0.068

0.002

− 0.024

0.135

− 0.090

EMB2

0.068

0.847

0.126

0.106

0.068

− 0.034

0.016

0.083

0.044

0.051

EMB3

0.064

0.865

0.097

− 0.005

0.085

0.069

− 0.003

0.028

0.039

0.056

INT1

0.177

0.109

0.780

0.267

0.056

0.083

0.191

0.121

0.154

0.077

INT2

0.097

0.120

0.797

0.194

0.161

0.197

0.129

0.142

0.147

0.104

INT3

0.191

0.148

0.821

0.208

0.098

0.103

0.122

0.135

0.121

0.116

INT4

0.148

0.116

0.771

0.268

0.172

0.176

0.112

0.202

0.177

0.176

IME1

0.162

0.048

0.221

0.742

0.082

0.214

0.251

0.110

0.174

0.201

IME2

0.230

− 0.036

0.212

0.732

0.212

0.172

0.169

0.118

0.146

0.110

IME3

0.162

0.092

0.213

0.753

0.100

0.223

0.156

0.169

0.127

0.200

IME4

0.157

0.038

0.240

0.744

0.224

0.128

0.160

0.187

0.198

0.139

IME5

0.150

0.090

0.238

0.766

0.228

0.049

0.152

0.254

0.116

0.159

ITR1

0.146

0.054

0.091

0.230

0.831

0.154

0.132

0.093

0.154

0.099

ITR2

0.151

0.067

0.152

0.170

0.810

0.190

0.152

0.146

0.160

0.102

ITR3

0.169

0.029

0.148

0.169

0.869

0.128

0.141

0.104

0.123

0.091

FUV1

0.163

0.099

0.251

0.207

0.175

0.759

0.128

0.183

0.142

0.213

FUV2

0.225

0.036

0.145

0.248

0.167

0.736

0.150

0.170

0.138

0.098

FUV3

0.175

0.027

0.155

0.178

0.222

0.779

0.205

0.132

0.094

0.222

PRV1

0.127

− 0.012

0.156

0.236

0.178

0.115

0.807

0.134

0.123

0.209

PRV2

0.172

0.030

0.183

0.192

0.147

0.165

0.826

0.127

0.101

0.130

PRV3

0.186

− 0.003

0.165

0.240

0.144

0.164

0.793

0.176

0.095

0.214

SOV1

0.187

0.036

0.157

0.214

0.053

0.143

0.164

0.816

0.120

0.202

SOV2

0.188

0.050

0.195

0.158

0.161

0.152

0.145

0.801

0.155

0.147

SOV3

0.157

0.036

0.174

0.239

0.153

0.141

0.117

0.838

0.085

0.160

EMV1

0.245

0.121

0.139

0.197

0.131

0.129

0.063

0.163

0.818

0.130

EMV2

0.209

0.092

0.202

0.228

0.175

0.072

0.115

0.133

0.792

0.192

EMV3

0.226

0.107

0.220

0.156

0.189

0.153

0.156

0.077

0.794

0.116

IFP1

0.148

0.021

0.105

0.237

0.120

0.172

0.213

0.219

0.089

0.815

IFP2

0.195

− 0.002

0.169

0.164

0.082

0.136

0.192

0.151

0.175

0.846

IFP3

0.211

0.006

0.143

0.210

0.122

0.178

0.147

0.157

0.164

0.827

Eigen-value

3.840

2.437

3.390

3.908

2.775

2.369

2.620

2.679

2.531

2.750

Variance%

11.295

7.166

9.969

11.494

8.162

6.968

7.707

7.878

7.446

8.089

Cumulative%

11.295

18.461

28.43

39.924

48.086

55.054

62.761

70.639

78.085

86.174

Appendix C: Common method bias analysis

Construct

Indicator

Substantive path coefficient

Method path coefficient

Content

CON1

0.969***

− 0.020

CON2

0.927***

0.032

CON3

0.939***

0.015

CON4

0.987***

− 0.028

Embeddedness

EMB1

0.930***

− 0.073*

EMB2

0.850***

0.063

EMB3

0.875***

− 0.013

Interaction

INT1

0.916***

− 0.026

INT2

0.927***

− 0.031

INT3

0.966***

− 0.062

INT4

0.848***

0.112**

Institutional mechanisms

IME1

0.882***

0.019

IME2

0.877***

0.000

IME3

0.910***

− 0.014

IME4

0.888***

0.020

IME5

0.928***

− 0.024

Information transparency

ITR1

0.931***

− 0.008

ITR2

0.899***

0.043

ITR3

0.970***

− 0.035

Functional value

FUV1

0.895***

0.039

FUV2

0.881***

0.002

FUV3

0.954***

− 0.041

Price value

PRV1

0.941***

− 0.015

PRV2

0.953***

− 0.031

PRV3

0.907***

0.045

Social value

SOV1

0.942***

− 0.009

SOV2

0.903***

0.029

SOV3

0.962***

− 0.020

Emotional value

EMV1

0.961***

− 0.039

EMV2

0.913***

− 0.030

EMV3

0.923***

0.008

Intention of future participation

IFP1

0.938***

− 0.008

IFP2

0.978***

− 0.028

IFP3

0.942***

0.019

  1. *p < 0.05; **p < 0.01; ***p < 0.001

Appendix D: Path comparison test

 

Path coefficient estimate

T value

Entrepreneur efforts

Platform characteristics

 

Functional value

0.307***

0.436***

19.797***

Price value

0.227**

0.457***

34.053***

Social value

0.331***

0.346***

2.186*

Emotional value

0.421***

0.310***

16.198***

T = (PC1 – PC2)/SQRT [(SE12 + SE22)/N], SE = standard error of path in the structural model, PC = path coefficient in the structural model; *p < 0.05, **p < 0.01, ***p < 0.001.

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Zhang, F., Zhang, H. & Gupta, S. Investor participation in reward-based crowdfunding: impacts of entrepreneur efforts, platform characteristics, and perceived value. Inf Technol Manag 24, 19–36 (2023). https://doi.org/10.1007/s10799-022-00363-x

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