Cornelius, PB;
Gokpinar, B;
(2019)
The Role of Customer Investor Involvement in Crowdfunding Success.
Management Science
10.1287/mnsc.2018.3211.
(In press).
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Abstract
Entrepreneurs increasingly use reward-based crowdfunding to finance innovation projects through a large number of customer investments. The existing academic literature has predominantly studied factors that drive crowd investments and whether crowdfunding predicts market success. However, we argue that the involvement of customers goes beyond the provision of capital. As investors, customers enter into a principal–agent relationship with entrepreneurs. Thus, entrepreneurs are often faced with a crowd of customer investors who try to influence product development. We show that entrepreneurs can benefit from this influence, because customer investors provide some of the support usually received from institutional investors. Greater involvement from customer investors thus increases funding success. This holds when we control for creator ability and project quality. The effect is driven by customers’ influence on product development and the reduction in agency costs for prospective customers. We also link the involvement of customer investors during crowdfunding to the crowdsourcing literature and show that its positive effect is augmented by the elicitation of external information through distant search.
| Type: | Article |
|---|---|
| Title: | The Role of Customer Investor Involvement in Crowdfunding Success |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1287/mnsc.2018.3211 |
| Publisher version: | https://doi.org/10.1287/mnsc.2018.3211 |
| Language: | English |
| Additional information: | Copyright: © 2019 The Author(s). Open Access Statement: This work is licensed under a Creative Commons Attribution-NonCommercialNoDerivatives 4.0 International License. You are free to download this work and share with others, but cannot change in any way or use commercially without permission, and you must attribute this work as “Management Science. Copyright © 2019 The Author(s). https://doi.org/10.1287/mnsc.2018.3211, used under a Creative Commons Attribution License: https://creativecommons.org/licenses/bync-nd/4.0/.” |
| Keywords: | crowdfunding, new product development, crowdsourcing, entrepreneurship, principal–agent relationship |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10056444 |
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