TABLE OF CONTENTS
1.1. Problem Statement
1.4. Scientific Contribution
1.5. Managerial Contribution
2. Theoretical Background
2.1. Crowdfunding and its Relevance for Innovation
2.2. Content Analysis of Crowdfunding Projects
2.3. Conceptual Model
2.4. Financial Value
2.5. Functional Value
2.6. Social Value
2.7. Epistemic Value
2.8. Emotional Value
2.9. Moderating Effect of Lead User Characteristics
3. Research Method
3.1. Questionnaire Design
3.2. Exemplary Crowdfunding Project
3.3. Measurement Development
3.4. Sample and Data Collection
4.1. Sample Characteristics
4.2. Multi-Item Measures
4.3. Test of Hypotheses
4.4. Cross classification
4.5. Feedback and Reactions of Respondents
5.1. General Discussion of Results
5.2. Managerial Implications
5.3. Limitations and Future Research
TABLE OF FIGURES
1. The five value dimensions driving the intention to participate in a crowdfunding project
2. Conceptual research model: Theory of intention driving values
3. Demographic and socioeconomic characteristics of sample
4. Histogram: criterion variable intention to invest
5. Conceptual model: Results
1. Overview current crowdfunding projects
2. Exemplary project proposal: Requirements and implementation
3. Scales used in questionnaire
4. Means and standard deviations on value drivers of exemplary crowdfunding case
5. Modelfit without moderating effect
6. Modelfit with moderating effect
8. Coefficients Regression
9. Cross classification of significant differences on mean values
The more generous we are, the more joyous we become. The more cooperative we are, the more valuable we become. The more enthusiastic we are, the more productive we become. The more serving we are, the more prosperous we become
William A. Ward (1921 - 1994)
Today, if you look at financial systems around the globe, more than half the population of the world - out of six billion people, more than three billion - do not qualify to take out a loan from a bank. This is a shame.
Muhammad Yunus (Nobel Peace Price 2006)
Each of us has much more hidden inside us than we have had a chance to explore. Unless we create an environment that enables us to discover the limits of our potential, we will never know what we have inside of us.
Muhammad Yunus (Nobel Peace Price 2006)
Preface: Three recent developments in the first decade of the new century:
1. Goods go public.
Due to digitalisation many products which were banned previously on a tangible medium, are nowadays transformed into bits and bytes and by that easily and cheaply to duplicate without any losses in quality. Most prominent examples are music and movies. It can be argued that they hold nowadays the characteristics of public goods: they are non-rival in consumption and due to sharefile networks it is (virtually) impossible to exclude consumers who did not pay for from consumption (Varian, 2005). The arduousness to protect property rights of theses public goods, lead to declining motivation of industrial investors to finance the provision of such goods (Easley, 2005).
- There is a need for a new approach to finance the provision of such goods
2. Rise of Open Source & Crowdsourcing networks.
The emerge and development of internet gave rise to a lot of projects in which (lead) users took an active part in the development of new solutions and products. Open Source projects such as Linux and Wikipedia are successful examples of online communities where users create something in a joint action. Virtual networks enable a new shape of division of labour. Jeff Howe terms this phenomena crowdsourcing and defines it as the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call (Howe, 2006).
- People use the internet to cooperate
- Consumers participate increasingly in the production process
3. The Nobel Peace Price 2006: Microcredits.
In the year 2006 Muhammad Yunus received the Nobel Peace Price for his commitment to give micro credits to entrepreneurs in developing countries. The Grameen bank of Yunus gives microcredits to entrepreneurs, who do not qualify for a loan from a regular bank, to empower them to lift themselves out of poverty and to live a life on their own.
- Social finance obtains new relevance and public recognition
Aspects of all three developments are closely related to the central theme of this research: The phenomena of crowdfunding.
Crowdfunding “describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the internet, in order to support efforts initiated by other people or organizations” (http://crowdfunding.pbwiki.com). It is about a group of consumers that join forces (financial resources) together, to make a specific project happen. Crowdfunding can be used for a variety of purposes: e.g. for a group purchase, political campaigns, disaster relief, support of artists, starting up a business. There are prominent examples where groups of several hundreds people pool money together to finance the CD production of a musician or the production of a movie. The outcome of a crowdfunding project can be of material or immaterial nature, the intent of the project can be commercial or non-profit. Thus, there is a variety of possible applications which can make use of the principle of crowdfunding.
How crowdfunding relates to the recent developments mentioned previously:
- The principle of crowdfunding can be used as an approach to finance the provision of public goods.
- The principle of crowdfunding uses the proven mechanism of crowdsourcing. While crowdsourcing focuses on pooling labor resources, crowdfunding pools another factor of production: capital.
- The principle of crowdfunding is a further step of consumer involvement in the production process.
- The principle of crowdfunding uses the idea of social finance which found global recognition with the award of the Nobel Price.
Hence, the concept of crowdfunding is highly relevant in present days. To start a crowdfunding project it is essential to understand the consumers’ motives that makes them contribute to a crowdfunding community. This research aims to reveal driving values which trigger the intention to participate financially in such a crowdfunding project. The research exclusively focuses on motives of consumers to participate in crowdfunding projects which pool money to enable somebody (or a group) to create something new. This could be music, art, software, but also the development of a new physical product, the set-up of a new business or something completely different.
This research investigates the phenomena of crowdfunding by analysing six prominent current crowdfunding projects and reviewing literature in different relevant scientific fields. A conceptual research model is proposed. It is based on the theoretical framework of consumption value (Sweeney and Soutar 2001; Seth et al. 1991) and identifies ten motivation driving values which are categorized in five value dimensions. Furthermore three antecedents and a moderating effect of lead user characteristics are identified. To verify the research model an examplary crowdfunding case was developed and posted together with a questionnaire. Based on the answers of 196 respondents several regression analyses were conducted to test the model. An extensive discussion part gives theoretical and practical implications. The findings gained in this research are worthful for everybody who plans to initiate a crowdfunding project.
Financial participation in a crowdfunding project can be seen from different perspectives: for example as a supportive action, an investment or an act of collective buying. This becomes obvious when we look at how differently crowdfunding projects designate their participating consumers, for example as supporters, investors, participants, believers. In this thesis the act of getting financially involved in a crowdfunding activity is described as making an investment and the person participating financially is called an investor. However, these designations were chosen without considering the different perpectives and they shall act as a substitute for all possible perspectives to facilitate readability. This research aims to gain insight into motivation relevant to all possible perspectives.
1.1. Problem Statement
The crucial point about crowdfunding is to attract individual consumers who are willing to invest in a specific project. To attract these consumers it is essential to know how they value the participation in a crowdfunding project. This research follows the definition of crowdfundig given above. But it focuses solely on those crowdfunding projects which aim to realize the creation of something new.
What drives consumers motivation to participate financially in a crowdfunding community that is aiming to enable the creation of something new?
The current research also aims to answer the following sub questions:
- What are the common characteristics of current crowdfunding projects?
- How can theory of consumption value serve as a framework to assess values that drive the intention to invest in a crowdfunding project?
- How does the evaluation of value drivers differ among respondents based on their demographic and socioeconomic characteristics?
- To what extent do lead user characteristics influence the impact of values on intention to invest in a crowdfunding project?
- What is the role of lead users when it comes to support a project in their field of interest?
- What antecedents that are directly related to the crowdfunding project have an impact on the driving values?
- What managerial implication for initiators of crowdfunding projects can be derived from the underlying motives?
This research does not provide insights into classical fundraising. It does not take into account communites or projects which solely fund money for charity purposes. This thesis exclusively focuses on crowdfunding projects which aim to finance the creation of something new. It can be differentiated between crowdfunding projects that aim to create material goods and projects that aim to produce immaterial goods. It is most likely that there are also different motivation patterns for both types of crowdfunding projects. But these differences are not considered in this research. Neither does this research examine for which type of projects the principle of crowdfunding is especially useful. The effects of the target amount level, the number of peer-investors and minimum price for an intended investment into a crowdfunding project are not part of this research. Moreover, the research does not take into account the motivation of initiators to finance their project via crowdfunding.
1.4. Scientific Contribution
This research will be the first (to the best of the author’s knowledge) that examines consumers’ motivation to participate financially in a crowdfunding community. As such, it contributes to the understanding of consumer behaviour and decision making processes.
We have existing literature explaining consumer technology adaptation with the help of the technology acceptance model (TAM) (Davis, 1989). The TAM is criticised for limited application and its parsimony. Furthermore its focus on attitudes is questionable, as recent research indicates that attitudes are not an appropiate predictor of the consumers’ intention to use a certain technology. Moreover, recent research suggests that value may be a driver of consumer intention (Kleijnen et al., 2007). This research will contribute to the existing literature to that effect that it uses the theory of consumption value (Sweeney and Soutar 2001; Seth et al. 1991) to explain consumer decision making in the context of crowdfunding. As previous research was limited on an overall evaluation of the value dimensions, this research elaborates indepth the value dimensions in context of crowdfunding. By incorporating different perspectives for value dimensions it aims to gain deeper insights. It incorporates value driving forces of contexts that, up to now, have been analysed separately as collective buying, investment decision making and donating behaviour into one model. This research merges three different literature streams: consumer behaviour, behavioral finance and (social) psychology. As such the research follows the argumentation of Konana et al. (2005) who propose a multifacet approach which accommodates social, economic and psychological perspective to achieve a comprehensive understanding of consumers doing online investments.
Furthermore this research also contributes to theory concerning lead user involvement in innovation processes (Hippel, 1988). The research examines the moderating effect of lead user characteristics on intention driving value to participate in an innovative project.
1.5. Managerial Contribution
Being appreciative of consumers’ motivation to participate in crowdfunding projects can help project initiators who want to employ crowdfunding to offer suitable incentives to attract supporters. Knowing what participants wish and value can increase the success of new features and services which really meet their needs. It is essential to satisfy all participating stakeholders in crowdfunding projects, especially the investors, and just by doing so a sustaining and stable business model can be achieved.
Using the principles of crowdfunding insights that were gained by this research might be helpful for project initiators when setting their marketing strategy in terms of targeting and positioning. Hence, the findings of this research may be very usefull to work out an appropriate crowdfunding design but also to improve communication with potential investors.
The structure of this thesis is as follows: As there is little literature on the phenomena of crowdfunding, first a representation of six current crowdfunding projects is given. A content analysis is conducted to identify common characteristics and differences of these crowdfunding projects. By examining the incentive structures and the particular crowdfunding designs first clues for potential motivation driver are obtained. In the following the consumption value model, as an abstract framework of capture driving values, is introduced. A literature review in different relevant scientific fields and a desk research is conducted to uncover relevant motivation for each value dimension. On the basis of this research, hypotheses and a conceptual model concerning motivation drivers and mediating and moderating effects is developed. Chapter 3 will discuss the development of the research design to test the conceptual model. In chapter 4 by means of several regression analyses the gathered date is used to test the conceptual model and its hypotheses. Furthermore the demographic and socioeconomic characteristics of the sampling frame and its differences on variables are presented. In chapter 5 the findings are critically discussed. It presents conclusions and main findings. Finally limitations and suggestions for future research are discussed.
2. THEORETICAL BACKGROUND
2.1. Crowdfunding and its relevance for Innovation
This research focuses on crowdfunding projects that aim to finance the creation of something new. As such crowdfunding serves as an enabler of innovation, defining innovation as the introduction of a new thing or method (Luecke and Katz, 2003). But next to the ability to provide the necessary capital resources to enable an innovation, the principle of crowdfunding has more positive impacts on the new product (service, solution) development process.
First, as consumers decide whether to invest in a crowdfunding project before the output is produced, their reaction on the proposal can be already interpreted as a market pre-test. The market (i.e. the consumer) indicates before the production process starts whether the outcome is wanted. Second, as crowdfunding (dependent on crowdfunding design) may let consumers participate financially in the market success of the project outcome, it offers an additional financial incentive to them to contribute in to development of a new product (or service or solution) as regards content. Their participation in the product development process may increase the degree to which the project outcome meets consumer needs.
Third, consumers who participate financially in sales, have most probably a higher intention to spread the innovation via word of mouth. This accelerates the diffusion and thus success of the project outcome.
The involvement of consumers in innovation processes is not new. Hippel (1988) argues to involve lead users in the development of new products, as they are a viable source for innovation. He defines lead users of a novel or enhanced product, process or service as those who display two characteristics: first lead users face need in the marketplace months or years before the bulk of that marketplace encounters them. Second lead users are positioned to benefit significantly by obtaining a solution to those needs. The three advantages of involving consumers in the innovation process via crowdfunding may even be stronger for lead users. As lead users are per definition ahead of the market, their evaluation is especially useful in pre-testing. Hippel (1988) claims that manufacturers which find lead users to adapt products for their own use, will have an advantage over manufacturers that do not involve lead users in the development process. Hence the second advantage of involving consumers in the product development process may also be stronger for lead users. Hippel and Krogh (2006) argue that freely revealing lead users may benefit by sharing ideas from enhancement of reputation and positive network effects due to an increased diffusion of their innovation. But it is questionable to which extent lead users are really willing to share their ideas in the long run without any financial benefits in return. Crowdfunding could be a possible approach to tackle this problem by giving an incentive in form of financial participation to lead user to share their ideas. Urban and Hippel (1988) suggested that lead users serve as opinion leaders to speed up diffusion of new products. As opinion leaders, the word-of-mouth of lead user has probably a stronger impact. Therefore, it seems that involvement of consumers in new product development is especially valuable when involving lead users.
Furthermore, the principle of crowdfunding can be especially interesting for lead users to implement their ideas themselves, as they often tend to establish the first companies which exploit a new user innovation (Hippel, 2006). A prominent example is the origin of the snowboard which was developed by users. Nowadays Burton, a snowboard company which was founded by a lead user, is one of the worlds leading companies in its industry. The bottleneck on the way to the realization of an idea is the requirement of financial resources. When institutions such as banks refuse to provide money because they do not see the potential of the idea or because the project does not promise any monetary return on investment, other ways of financing are needed. Hence, the principle of crowdfunding can find application for (lead) users who want to realize their ideas on their own.
2.2. Content Analysis of Crowdfunding Projects
In the following is an overview given about six prominent current projects related to crowdfunding. All projects are online projects.
Artistshare defines itself as a place where fans fund the projects of their favorite artists in exchange for the privilege of participating in the creative process. The supporting fans are titled as participants . Most of the artists offer a range of different packages to their fans. These packages have different participant-levels which determine its price, ranging from a few dollars up to 10.000 US Dollar or more. Dependent on the participant-level, and by that the price, these packages include different benefits which are set independently by the artists. They often include downloads of music, notes about the recording process, exclusive photos, personal stories, video records of concerts, exclusive interviews and autographs of the artist. High value packages in some cases include items such as a. a personal letter of appreciation, concert tickets or the personal iPod of the artist full with his favorite songs. Artistshare is very much about developing long lasting relationships with the fans. It is about supporting an artist financially and, in return, being involved by participating in the creative process.
Fundable lets groups of people pool money to make purchases or raise money. It serves as a platform to raise money for a project. These projects can be of different nature as for example a personal project, a ground trip, group-buying to get a discount, pooling money for a gift, selling to a group before making a product or collect money to throw an event. Everybody can be a group initiator and set up projects for different purposes. Fundable distinguished basically between three types of raising money. Purchase: pooling money for a purchase. Group initiator buys on behalf and then distributes.
Fundraiser: pooling money for a cause. Group initiator ensures that the fund fulfils its purpose. Offer: seller offers a product. The group leader makes a product, then distributes to buyers. For any type the group initiator sets the amount of money which is to be funded and the number of needed people, which leads to the amount of money everybody has to give. Every project has limited runtime. If the collection expires before the aimed amount is reached, the project does not accomplish and nobody has to pay.
Kiva is a platform where people can lend money directly to entrepreneurs in developing countries. These credits aim to empower people to lift themselves out of poverty. The amount of money entrepreneurs ask for usually is around $1.000. The smallest amount that can be lend is $25. The credits are usually pooled together from several people. Entrepreneurs introduce themselves with a picture and an explanation what kind of business they want to set up. Borrowers receive periodic e- mail journal updates about the developments of the business they lent the money to. The period for the repayment of the amount usually is 6 12 months. Borrowers do also have a personal profile on the website, so that people can see who (else) lent money to a project.
A Swarm of Angels (www.aswarmofangels.com)
A Swarm of Angels approaches itself as a new way to fund and make a film together. The project aims to create a £1 million film. If the movie is realized it will be freely shareable and is non-profit distributing. The project is split into 5 phases. At the end of the fifth phase the final movie is the result. The achievement of the next phase is coupled to a specific number of members. Each member supports the project with £25. In return members can vote on creative decisions, have priority access to downloads, can join the production crew and receive a member-only DVD and exclusive merchandise.
The most progressive example that makes use of crowdfunding is probably SellaBand. SellaBand is based upon the idea that musicians and fans make music and money together. Musicians, who do not have any record deal, upload their music and their profiles to attract consumers to invest in them. Consumers, who are called believers, can buy parts (one part costs $10) of artists and enable them by that to produce their own CD. When believers accumulated the amount of $50.000, the artist records a CD in a professional studio. The CD is later offered as a free download on SellaBands webpage. The income which is generated via advertising in the download section of the website is shared by artists, believers and SellaBand. Next to future revenues every believer receives one CD for every part he oder she holds. Some musicians try to attract believers by giving additional incentives for every part (as e.g. exclusive downloads, lottery of concert tickets). Believer do also have a personal profile on the SellaBand website, so that people can see in which bands the believer invested.
My Football Club (www.myfootballclub.co.uk)
My Football Club aims to collect £1.75 million to purchase a soccer club. The amount should be provided by 50.000 members who pay £35 each. If 50.000 people came together every member owed an equal share and had an equal voice. The members can then hold a vote on most of decisions concerning the team. They decide which team to buy, on team selections, player transfers and club finances.
The examples above show that each project is unique in its approach to the principle of crowdfunding. All projects have a different character. Each project gives a unique name to its supporters who constitute the essential part of a crowdfunding project. But even if every project sets a different focus, there are common underlying characteristics and techniques which are summarized in the following.
A) Personal introduction of the project initiator
The person responsible for executing the project, is introduced for most project very much in detail. Personal details as a short curriculum and pictures are given in most cases.
B) Project realization only if the planned amount has been collected
Most of the projects only start if a sufficient number of consumers decided to support the project. Then consumers can be sure that they will never be the only ones investing in the project. It will be always a group investment or no investment at all.
C) Passive involvement of investors in the project
In most crowdfunding projects investors are provided with exclusive up-to-date information about project progress and insights in development stage of the project.
D) Active involvement of investors in the project
In projects like A Swarm of Angels and MyFootballclub investors take an active role in decisions processes of the project. By this co-determination investors get actively involved in the project. This point is very much related to crowdsourcing which were discussed briefly in the introduction.
E) Material copy of the project outcome
In some crowdfunding projects investors receive a material copy of the project outcome. Like the CD for SellaBand or the DVD for A Swarm of Angels.
F) Investors participate in financial success of project
That investors participate financially in a commercial success of the project, holds only for the example of SellaBand which can be seen as the most progressive example of crowdfunding.
G) Community platform for investors
Projects as SellaBand or Kiva offer a platform which can be used to communicate and selfpresentation of investors. Investors can set up their online profile with personal details as photos, personal introduction and contact data.
H) Project outcome is freely available to everybody
In many crowdfunding projects, the main outcome of the project is freely available to everybody, also for people who did not contribute financially to the project.
Table 1 summarizes the key characteristics of the crowdfunding projects presented above. The column common factors shows which of the identified common crowdfunding characteristics apply to the particular project.
Table1: Overview Crowdfunding Projects
illustration not visible in this excerpt
* Indicates which of the identified common characteristics of crowdfunding apply to the specific project
2.3. Conceptual Model
The aim of this research is to get an understanding of what drives consumers motivation to participate financially in a crowdfunding community. Zeithamls (1988) definition of perceived value as consumers overall assessment of the utility of a product (or service) based on perceptions of what is received and what is given, is used to answer the research question. Seth et al. (1991) argue that consumer choice is a function of multiple consumption values. Hence, this research aims to reveal values that drive consumers intention to invest in a crowdfunding project. Intention is defined as the decision to act in a particular way (Fishbein and Ajzen, 1975). The theoretical framework of consumption values serves as the basis to examine drivers of motivation to participate in crowdfunding projects (Sweeney and Soutar 2001; Seth et al. 1991). The current research model (see figure 1) includes five value dimensions: financial value, functional value, social value, epistemic value and emotional value.
Conditional value is defined as perceived utility acquired by an alternative as the result of the specific situation or set of circumstances facing the choice maker (Sheth et al. 1991). It arises when situational factors moderate the perceived value-outcome process. Conditional value is not part of the current research model, as situational factors do not seem of relevance for the motivation to participate in a crowdfunding project.
In the study of Sweeney et al. (2001) value dimensions are allowed to be interrelated, contrary to the study of Seth et al. (1991), who argue that value dimension are independent as they relate additively and contribute incrementally to choice. This framework follows the argumentation of Sweeney et al. that value dimensions do not have to be necessarily independent. This is also conditioned to a variable that serves as an antecedent for two different value dimensions, consequently these value dimensions cannot be absolutely independent.
Figure 1: The five value dimensions driving the intention to participate in a crowdfunding project
illustration not visible in this excerpt
2.4. Financial Value
The dimension financial value is based on the functional value dimension in terms of price (value for money) of Sweeney and Soutar (2001). The financial value dimension in the current model is defined in terms of the investors individual return on investment. As identified in the previous, some consumers might receive an individual return on their investment, partly dependent on the size of their share. This return on investment can be tangible in the sense of a copy of the outcome of the supported project, but also monetarian as a financial participation on future revenues generated by the outcome of the supported project. A review on financial behaviour literature reveals insights into the financial motivation pattern of investors. Behavioural finance argues that some financial phenomena can plausibly be understood by using models in which some agents are not fully rational (Barberis and Thaler, 2003). The most dominant rationales used by consumers will be discussed next.
The definition of perceived economic value used in this research is based on Zeithamls idea of customer value as a trade-off between give and get components (Zeithaml, 1988). Perceived economic value captures the perceived overall investment conditions. It considers the trade-off between what the individual pays and receives in return for the investment. As an overall assessment, it captures a monetarian return (as e.g. a participation on future revenues) and/or tangible returns (as e.g. an individual copy of the outcome). In economic terms, investment utilizes capital for maximal possible return (Adair et al., 1994). Hence, the assumption of a positive relationship between perceived economic value of an investment possibility and the intention to invest in the project seems reasonable. Even if the economic criteria seem to vary in importance, it is important for informal investors to obtain an economic return on their investment (Landström, 1998). It is assumed that perceived positive economic value of the project drives intention to invest in a crowdfunding project.
H1: Perceived positive economic value of the project has a positive effect on the intention to invest in a crowdfunding project.
For the perceived economic value of a project, two antecedents were identified. These variables do not present direct values to the consumer and consequently do not directly drive intention to invest. But they are highly related to the project and have mediated by economic value impact on the intention to invest.
Social Utility (as antecedent of economic value)
The perceived functional utility of the project-outcome for society has an indirect influence on intention to invest. The concept of functional utility is discussed in sub-chapter 2.4. When regarding society as a market, perceived utility of society for the project outcome should increase the perceived economic value of the project, as a perceived market demand for the project outcome increases expected future revenues from the project. Maula et al. (2005) show that individuals perception of good opportunities to start a new busines, increases its propensity to make informal investments. The evaluation of the future prospects of a project are relevant when to decide whether one should invest in a crowdfunding project. When an investor expects a high market demand for the project outcome the expected get-components of economic value increase if the investor participates financially on future revenues. Hence, it is hypothesised that social utility serves as an antencedent of economic value.
H1b: The relationship between perceived positive utility of society for the project outcome and the intention to invest in the crowdfunding project is mediated by the perceived economic value of the project.
Abilities Initiator (as antecedent of economic value)
Research about the informal investors ways of identifying and assessing new investment opportunities showed that investment decisions to a large extent are person-dependent (Hoffmann, 1972). Studies show the importance attached by informal investors, in their assessments of new investment proposals to the entrepreneurs competence and capability (Landström, 1998). People who invest in crowdfunding projects provide money to the project initiator before the product (or service) is produced. Thus, when an investor considers the overall give and get components related to a proposed crowdfunding proposal, assessing economic value, the perceived abilities of the initiator are of importance. As it is not possible to evaluate the project output in advance with regard to the quality of the get components, investors fully rely on the people running the project. Hence, it is suggested that the perceived abilities of the project initiator have a positive impact on the perceived economic value.
H1c: The relationship between the perceived positive abilities of the project initiator and the intention to invest in the crowdfunding project is mediated by the perceived economic value of the project.
Beyond the perceived general economic value, crowdfunding projects can provide the chance of an extraordinary financial gain. As people invest at an early stage of the project, usually before the production process starts, it is difficult to evaluate the outcome and by that the demand of the market. Especially the market reaction for experimental products (creative and artistic output such as music or movies) is difficult to predict. The demand for this type of products is highly uncertain, since it is difficult for consumers to evaluate the quality of such a product until they actually experienced it (Sawhney, 1996). But these projects always bear the chance to hit taste of the bulk of consumers and potentially are able to generate large revenues. Thus, investing in crowdfunding projects, where investors receive a proportional part of future revenues, comes along with the potential chance to generate extreme revenues. Tversky and Kahneman (1986) conducted experiments concerning prospect theory which tries to captures consumer attitudes to risky gambles. The results of these experiments give several insights in investment behaviour relevant to crowdfunding. Their experiments show that people are risk averse only over gains (loss aversion), and risk-seeking over losses. Despite the fact of loss aversion, there are situations in which the small chance of large gains can lead to risk-seeking. The findings of Tversky and Kahneman (1986) show that the small chance of a large gain leads to a risk seeking behaviour (lottery effect). It is argued that this phenomenon is of relevance in the context of crowdfunding. Crowdfunding participants support a project from the beginning and do not know to which extent the project becomes a commercial success. It is assumed that the perceived chance to hit the jackpot has a positive influence on the intention to invest in a crowdfunding project.
H2: The chance to gain an exceedingly high financial profit has a positive effect on the intention to to invest in a crowdfunding project.
Another finding of Tversky and Kahneman (1979) is the certainty effect which says that people put much more weight on outcomes that are certain than on outcomes that are merely probable. People also tend to prefer a sure-small reward over a large-uncertain reward when there are effort requirements present (Kivetz, 2003). This preference of people for the absolute is also assumed to be of importance for crowdfunding. As identified in the content analysis, in some crowdfunding projects investors receive a material copy of the project outcome. While future revenues are hard to predict and merely unsure, a guaranteed tangible return (usually a copy or a documentation of the outcome of the crowdfunding project) serves this certainty effect. It is hypothesised that a guaranteed tangible copy of the outcome of the crowdfunding project drives motivation to invest.
H3: A guaranteed tangible output of the supported project has a positive effect on the intention to invest in a crowdfunding project.
2.5. Functional Value
Sweeney and Soutar (2001) introduce the functional value dimension in terms of performance (quality). In their definition functional value is defined as utility derived from the perceived functional, utilitarian or physical performance. Functional value follows the definition of functional product meaning. As such functional value refers to the abilities of the project outcome to accomplish specific acts, based on properties such as its physical characteristics and features (Fournier, 1991). Hence, the functional value dimension, as defined here in the context with crowdfunding, answers basically the question to which extent the project outcome serves a functional need. For every crowdfunding project outcome a distinction can be made between functional utility for a single consumer (personal utility) and the functional utility for others in general (society utility). It is suggested that personal utility presents a value which directly drives intention to invest. It is suggested that society utility does not directly drive intention to invest, as it does not present a direct value to consumers. But society utility has mediated by other values (economic value, supportiveness) an indirect impact on the intention to invest.
Personal utility is defined as the degree to which the functional benefits of the project outcome serves a functional need of the individual consumer. Concerning the functional meaning of a product or a service, consumers choose in general those products (and services) that provide the greatest utility to them (Ligas, 2000). Furthermore, studies from industrial and process innovations have shown that the greater the functional benefits are an entity expects to obtain from a needed innovation, the greater the entitys investment in obtaining a solution (Mansfield, 1968). It is suggested that this also applies in the context of crowdfunding. The higher the personal functional utility a consumer expects to obtain from the project outcome, the higher is the consumers intention to invest in that project in order to make use of the outcome. The triggering motivation is to enable the provosion of the project outcome in order to satisfy ones needs for it. It is hypothesised that positive perceived personal utility derived from the project outcome, drives intention to invest in the project.
H4: Perceived positive personal functional utility derived from the project outcome has a positive effect on the intention to invest in a crowdfunding project.
2.6. Social Value
Social value is defined as the utility derived from the products or service ability to enhance social self-concept (Sweeney and Soutar, 2001). The association with one or more specific social groups can lead to perceived utility, which increases the social value of a product or service (Seth et al., 1991).
Motivation behaviour can also arise from a need of the consumer to express ones self-concept (Houston and Walker, 1996). A product or service can help the consumer in the development of a visible, unique and personal representation of him- or herself. As that products serve as stimuli; acting with a product that has a specific meaning enables the consumer to a) express a role to others, b) define ones unique or conformist character, or c) indicate common understanding in a socially constructed marketplace (Ligas, 2000). Hence, people may use engagement in a crowdfunding project to express themselves. Especially the internet is used increasingly as a platform to connect and to present oneselves, as can be seen from the emergence and success of social online networks as MySpace, Hyves (Netherlands) or StudiVZ (Germany). Schau and Gilly (2003) demonstrated in their study that consumers use digital stimuli and hyperlinking to express who they are. Entertainment- oriented external links (as music, film/video, sports, and hobbies) as well as technology orientated ones are most common. Hence, the linking of commitment to crowdfunding activities to personal profiles on networks as MySpace can be used to shape ones online-identity. Thus, when engagement in crowdfunding activities can be used to shape ones online identity and to present oneself, it is suggested that self-expressiveness serves as a driver to participate in a crowdfunding project. It is hypothesised that self-expressiveness, defined as the degree to which consumers perceive an investment in the corresponding crowdfunding project as suitable for expressing their emotions and social or personal identity (Nysveen et al., 2005), has a positive impact on the intention to invest.
H5: The possibility to use engagement in crowdfunding to express oneself has a positive effect on the intention to invest in a crowdfunding project.
An important feature of crowdfunding is that a project is not financed by a single investor but jointly by a group of consumers (investors). Thus the investor is a part of a group of peer-investors. Many crowdfunding projects offer a community platform for their investors. Bagozzi and Dholakia (2002) examined how individual and social determinants of action drive participation in virtual communities. Their results show that social identification with the group increases intention to be an active member of the group. Dyson (1997) argues that people seek virtual community for fellowship and security, as the world becomes increasingly complex. Klandermans (1984) finding that the motivation of people to participate in a social movement is higher when they expect that others will also participate, applies to most crowdfunding projects. In most of the projects the investment is only accomplished when enough people participate and the target sum (which is announced in advance) is achieved. As that people are ensured that they will invest as a group and not as a single investor. It is suggested that the involvement in a group of peer-investors presents a value to consumers and is a driving force on the intention to invest.
H6: Perceived involvement in a group of peer-investors has a positive effect on the intention to invest in a crowdfunding project.