Liability of Newness, Startup Capabilities and Crowdfunding Success

Abstract

Though crowdfunding has emerged as a cost-effective means to market innovative products and a channel for financial resource acquisition, our understanding about what makes a successful crowdfunding is still limited. This study is motivated by the presence of the inconsistency that both entrepreneurs and investors pay more attention to capabilities required for developing prototype products rather than capabilities needed to deliver the promised products in crowdfunding. By drawing insights from studies about liability of newness and legitimacy in institutional theory, this study argues that startups can overcome the liability of newness, earn investor trust, and successfully complete crowdfunding campaigns by effectively presenting visible and invisible capabilities. This study presents a set of testable propositions predicting the likelihood of crowdfunding success and explains the theoretical and practical value of the proposed conceptualization of startup capabilities.

Keywords

• crowdfunding
• visible and invisible startup capabilities
• liability of newness