Early backers' social and geographic influences on the success of crowdfunding

Abstract

PurposeWhile crowdfunding provides a novel method for entrepreneurs and startups to raise funding from consumers, a high percentage of crowdfunding projects fail to achieve their funding goals. This study aims to investigate the impact of early backers on crowdfunding success (i.e. reaching funding goals) by considering their social and geographic peer influences.Design/methodology/approachThe author constructed a social network and a geographic network of crowdfunding backers based on a data set from Kickstarter.com and used closeness centrality to quantify the network positions of early backers.FindingsFor project categories with low completion uncertainty, early backers who were socially closer to their peers led to a higher chance of success. However, such an impact declines for projects with higher uncertainty. On the other hand, for project categories with high completion uncertainty, early backers who were geographically closer to their peers led to a higher chance of success. Still, such an impact declines for projects with lower uncertainty.Originality/valueThis paper contributes to the literature by investigating the peer influence between socially and geographically related consumers on a crowdfunding platform. The findings provide managerial implications for crowdfunding project creators to target the right crowd.