The Signal Value of Crowdfunded Products

Abstract

Crowdfunding has emerged as an alternative means of financing new ventures by utilizing the financial support of a large group of individual investors. In this research, we ask a novel question: does being crowdfunded carry any signal value for the broader market of observing consumers? Seven studies reveal a consumer preference for “crowdfunded products”, even after controlling for a product’s objective product characteristics. We identify two inferences that help explain this effect: (1) consumers perceive crowdfunded products to be of higher quality, and (2) they believe that supporting crowdfunding reduces inequality in the marketplace. We further document an important boundary condition of the first inference: our identified effect reverses in high risk domains (e.g., products that involve high physical risk), due to consumer perceptions that the crowdfunding model lacks sufficient professionalism to mitigate risk. With regard to the second inference, we find that the positive crowdfunding effect is particularly strong among consumers who value social equality. Taken together, our work sheds new light on consumer perceptions of crowdfunding, elucidates why and when consumers prefer crowdfunded products, and offers actionable implications for managers.

Crowdfunding performance, market performance, and the moderating roles of product innovativeness and experts' judgment: Evidence from the movie industry

“…This should increase the confidence that our results can be ascribed to the signaling role of CF. Nevertheless, in line with recent CF studies (Acar et al, 2021), we urge future studies to address the same questions studied here using an experimental setting, which would naturally eliminate the effect of unobservables, thus overcoming the intrinsic limitations of the current approach.…”

A Matching Study on the Influence of Advertised Information Expression and Product Type on Consumer Purchase Intention

“…Search products are characterized by standardization. After a consumer searches out the main information about a product, he or she can conduct a comparative analysis to evaluate and make decisions about the product without the need to obtain relevant information through purchase or use (Acar et al, 2021). A simple and explicit expression of information can effectively and accurately provide relevant information about search products, appeal to consumers' rational thinking, induce cognitively oriented benefits, and improve the efficiency and effectiveness of communicating product information to consumers (Benlian et al, 2012).…”

Perceiving, Coping with, and Changing Economic Inequality in the Marketplace

“…Specifically, future studies could examine how perceptions of economic inequality are shaped by the number (high vs. low) and type (small vs. large) of companies that populate the marketplace and the degree of market competitiveness. For example, high competition and the salience of consumer-backed (i.e., crowdsourced) sellers (Acar et al, 2021) and access-based (e.g., peer-to-peer) providers (Costello & Reczek, 2020;Graul & Brough, 2021) may potentially boost consumers' perceptions of a democratized marketplace, increasing perceptions of a more equal and fair society. Similarly, brand positioning strategies and biographies that highlight narratives about underdogs (Paharia, Keinan, Avery, & Schor, 2011), survival (Paharia, Avery, & Keinan, 2014), and entrepreneurship could drive perceptions of abundant economic opportunities and hence high meritocracy in the marketplace.…”

“…Marketing scholars can illuminate how individuals may use their purchasing power to reward or punish firms that challenge or perpetuate economic inequality. For example, individuals may buy from small sellers in order to challenge inequality (Acar et al, 2021;Song, Jung, & Zhang, 2021), or they may support large firms in order to preserve inequality (Paharia & Swaminathan, 2019;Xu et al, 2021). Likewise, individuals may buy from brands that create initiatives to reduce inequality.…”

“…Some recent marketing studies have begun to explore how awareness of and concerns about inequality of resources in society may contribute to consumers' patronage of certain product categories, companies, and brands (e.g., Acar, Dahl, Fuchs, & Schreier, 2021;Bamberger, Homburg, & Wielgos, 2021;Crockett, 2017;Mohan, Schlager, Deshpand e, & Norton, 2018;Ordabayeva & Chandon, 2011;Schlager, Mohan, DeCelles, & Norton, 2021;Walasek, Bhatia, & Brown, 2018;Xu, Bolton, & Winterich, 2021). While these studies offer a helpful initial window into the effects of inequality on the marketplace, more research is needed to develop a comprehensive, systematic, and nuanced understanding of the role of economic inequality in individuals' lives.…”