Investigating the Impact of Competition and Incentive Design on Performance of Crowdfunding Projects: A Case of Independent Movies

Abstract

Recently, crowdfunding has become a popular e-commerce model based on web 2.0 platforms for fundraisers to collect funding from a large group of supporters using the Internet. However, many projects failed to reach their funding targets. Despite the growing interest of academic researchers and e-commerce professionals in identifying drivers of crowdfunding success, important factors like competition and incentive design have not received much attention in prior research. In this study we aim to fill this gap by investigating the impact of competition and incentive design on the performance of crowdfunding projects. Drawing upon literature of entrepreneurship, we develop a research model involving key factors such as competition intensity and the number of reward levels. Using real data of 209 independent movie projects of an online crowdfunding platform, we test the proposed hypotheses of the impact of competition and incentive design on crowdfunding success. Our results show that competition plays a significant role in crowdfunding performance. The higher competition pressure is, the lower performance of crowdfunding projects will be. We also find that factors such as the number of reward levels and the plan of attending movie festivals are essential to the success of crowdfunding projects, but the funding level of getting the top reward does not exert a significant impact. Our study contributes to the e-commerce literature by further exploring the mechanism of crowdfunding success with theoretical explanation and empirical evidence. Researchers and professionals can apply our theoretical findings regarding competition and incentive design in other e-commerce platforms. Furthermore, our results provide useful managerial insights and operational policies for project founders and managers of crowdfunding platforms.

Keywords

• reward-based crowdfunding
• electronic commerce
• entrepreneurship
• competition intensity
• incentive design
• crowdfunding success