We investigate the effect of innovativeness on crowdfunding outcomes. Because crowdfunding campaigns characterized by greater incremental innovativeness are more comprehensible and generate more user value for typical crowdfunders, incremental innovativeness may result in more favorable funding outcomes. By comparison, campaigns that feature greater radical innovativeness are riskier to develop, harder for crowdfunders to understand and result in less favorable funding outcomes. This negative effect of radical innovativeness may be mitigated by incremental innovativeness, which may help crowdfunders to understand and appreciate radical innovativeness more. A sample of 334 Kickstarter campaigns provides support for our hypotheses.

We explore how product images and color in business plans influence venture investment screening decisions. Because images are accessible, memorable, and influential, we argue that product images in a business plan will increase the likelihood of favorable judgments during screening decisions. Moreover, because red and blue automatically affect an individual's cognition in different manners such that red elicits negative associations and blue elicits positive ones from the evaluators, we predict that the use of red in a business plan will decrease the favorability of judgments during screening decisions, while the use of blue will increase their favorability. Using a quasi-experimental field study and a series of controlled experiments, we find partial support for a positive effect of product images on favorable screening decisions and a consistent negative effect of red on favorable screening decisions.

Abstract Research Summary Research is scant on how multiple venture attributes combine as “whole packages” of signals (or cognitive configurations) in resource holders’ eyes, shaping a venture's ability to mobilize resources. Drawing on a qualitative comparative analysis of 1,395 crowdfunding campaigns, we identified different configurations of signals for high and low resource mobilization, theorizing abductively their underlying mechanisms through the analysis of case‐level qualitative data. Our results explain some past mixed findings, such as the contradictory effects of social value and entrepreneurial narratives, showing that these narratives can instead be successfully combined in the presence of signals of venture quality and community embeddedness. We show that there is no single best way to impress resource holders, but multiple recipes to holistically communicate a venture's value. Managerial Summary Analyzing Kickstarter crowdfunding campaigns, we examine how entrepreneurs combine four signals to raise money: 1) the venture's underlying quality; 2) social networks; 3) narratives; 4) embeddedness in the crowdfunding community. We identified four successful configurations of these signals (500% above the funding goal) and two failing configurations (4% of the funding goal). Narratives per se are not sufficient to mobilize resources, unless backed by signals of quality and community embeddedness. A simpler narrative is supported by cheaper quality signals (product images). More complex narratives (combining social value, entrepreneurial orientation, positive psychology) are supported by more costly signals (videos). Our results encourage entrepreneurs to look beyond “silver bullet” solutions and think holistically how to communicate their ventures as “whole packages”.

Building on the insights from observational learning and other social influence research, this study challenges the existing literature that proposes a linear relationship between prior funding and subsequent contributions in the crowdfunding setting. Instead, we propose a U-shaped relationship, illustrating a negative relationship between prior funding and subsequent contributions when funding amounts are small and this relationship becomes positive when prior funding amounts are large. Consistent with the rational herding perspective, we assume that individuals do not mindlessly mimic one others' behaviors, but incorporate quality signals into their decision-making. Signals indicating a high quality project such as video quality, as well as the preparedness and passion of the entrepreneur enhance this U-shaped relationship whereas indicators of situational urgency weaken this relationship. Based on a sample of 11,019 daily observations of 333 Kickstarter projects, we find general support for our hypotheses. Our post hoc experiment further supports the mechanisms underlying the U-shaped relationship. This paper extends our understanding of the relationship between past actions and subsequent behavior, and contributes to the literatures of observational learning, crowdfunding, and visual information. Executive summary We challenge the extant literature that has proposed, but inconsistently documented, a positive effect of prior funding on subsequent crowdfunding contributions. We argue that such inconsistency is due to the lack of integration of insights from other social influence research, such as observational learning, threshold models, and bystander effects. This research has been limited when postulating that crowdfunding backers simply imitate others' actions in order to mitigate uncertainty producing a linear effect, yet such an effect depends on the intensity of others' actions and may be curvilinear. This research overlooks the fact that backers do not merely passively imitate others' behaviors, but incorporate quality signals sent by entrepreneurs to make such decisions. Thus, it is important to account for potential moderators that may influence the complex relationship between prior funding and subsequent contributions. Based on observational learning research and related models, accrued prior funding may be perceived differently by potential backers: individuals may view accrued funding as a sign of a decreased funding need on the part of a campaign's creators, because others are already backing the campaign or, alternatively, they may see it as a cue of high product quality. These conflicting effects may lead to a U-shaped relationship between prior funding and subsequent contributions at a collective level. At low funding levels, prior funding may be negatively associated with subsequent contributions because such levels indicate there is already support, but that the campaign may not be of high quality. At medium levels, prior funding may have no effect on contributions, aside from halfhearted interest of other backers. At high levels, prior funding may be positively related to subsequent contributions as this sends a robust cue of project quality and convinces prospective donors to contribute. Further, we derive a U-shaped relationship which may be moderated by visual media-based quality signals and situational urgency. To test these hypotheses, we conducted two studies. One was a field study of 333 Kickstarter projects, with 11,019 daily observations of crowdfunding activities from mid-February 2013 through mid-April 2013. We used the Kicktraq website to track Kickstarter projects and recruited 390 participants via Amazon Mechanical Turk (MTurk) to evaluate the video pitches on Kickstarter. Our results suggest a negative relationship between prior funding and subsequent contributions when funding amounts are small. This relationship becomes positive when prior funding amounts are large. Thus, we find a U-shaped relationship between prior funding and subsequent contributions, with an inflection point when prior funding amounts reach between 72% and 80% of the funding goal. This is strengthened in the presence of visual media-based quality signals, such as video quality, as well as the preparedness and passion of the entrepreneur. However, indicators of situational urgency may weaken this U-shaped relationship. We followed up with a post hoc experiment to document the two mechanisms by which prior funding influence subsequent contributions. We found that increases in the prior funding amount increased perceived product quality but decreased perceived urgency. These perceptions were found to jointly influence participants' proposed pledged amounts, supporting an explanation of a complex relationship between prior funding and subsequent contributions. This study is among the first to offer a more complete picture of the relationship between past actions and subsequent behavior under market and institutional constraints (i.e., when market actors observe the censored behaviors of other actors on crowdfunding platforms) and contributes to the literatures of observational learning, crowdfunding, and visual information.