Crowd Reactions to Entrepreneurial Failure in Rewards-Based Crowdfunding: A Psychological Contract Theory Perspective

Abstract

Rewards-based crowdfunding (RBC) has recently gained popularity as an alternative means of finance to help entrepreneurs bring novel projects to life. We theorize that crowdfunding backers perceive an implicit psychological contract with campaign creators. When promised rewards fail to materialize post fundraising, backers may perceive entrepreneurs’ failure to deliver rewards as a violation of their psychological contract with him or her. Drawing on psychological contract theory and using Eisenhardt’s comparative case methodology, we generate insights about crowd reactions to creators’ failure to deliver rewards to backers. Our research generates the novel insight that in the event of delivery failure, backers who perceive a transactional psychological contract with creators are more likely to display negative emotional reactions, while backers who perceive a relational psychological contract are more likely to display positive emotional reactions. Furthermore, we identify three progressive stages of backers’ interaction with creators in failed RBC campaigns, ‘committing’, ‘crisis handling’, and ‘coping-up’ and highlight the crowds’ emotional valence associated with each stage. Our analyses of the campaign comments reveal insights of interest to RBC players and hold implications for the future development of crowdfunding.

The Realities of Learning through Failure in Entrepreneurship: Results of Qualitative Research

“…Let us remember that the Tunisian market has specificities that only failure allows to understand the way this market works and to acquire the necessary social know-how. In all cases, failure allows entrepreneurs to acquire knowledge and skills to manage their relational network (Oberoi et al, 2022;Cacciotti et al, 2020;Wyrwich et al, 2019). For them, the failure represented an opportunity to be able to integrate into a professional relational network.…”

“…It generally represents the cause of their failure, which pushes them to revise their managerial choices to avoid these failures and to manage their budgets and time better. From this point of view, failure constitutes an opportunity to acquire managerial knowledge (Li et al, 2021;Thumiki, 2017;Kong et al, 2020;Oberoi et al, 2022). In this sense, one interviewee argues, "Especially I will not have a partner anymore, I absolutely need to find someone to take care of the managerial aspect, because I am finally convinced that hiring a manager is not a choice it is a necessity especially since I just discovered that I am not a good manager specifically money management).…”

“…Hmida (2021); Seckler et al (2017); Lattacher and Wdowiak (2020); Schwab et al (2022) consider entrepreneurship as a remedy to the economic problems that countries are experiencing. Several authors, including Pinto (2013); Oberoi et al (2022); Kim et al (2020); Amankwah-Amoah et al (2019), in addition to the European Commission (2007), have highlighted the role that entrepreneurship plays in the economic growth of a country. In the same sense, Bachiri (2016); Toumi and Smida (2018); Besra and Rahman (2020); Par sanejad et al (2019) argue that entrepreneurship is a real economic and social phenomenon.…”

The reward crowdfunding campaign management process: an engagement perspective

“…Yet others studied post-campaign outcomes and delivery records (e.g. Oberoi et al, 2022;Appio et al, 2020;Mollick and Kuppuswamy, 2014). Fewer studies examine precampaign stages, mostly investigating predictors of crowdfunding adoption by potential fundraisers (e.g.…”

“…Yet others studied post-campaign outcomes and delivery records (e.g. Oberoi et al. , 2022; Appio et al.…”