An Empirical Examination of the Peer Influence on Crowdfunding Markets

Crowdfunding has recently emerged as a novel way for people to collect monetary donation from large numbers of internet users. Since 2009, the volume of crowdfunding has increased exponentially, reaching 16.2 billion in 2014. A growing number of literature starts to investigate social influence in crowdfunding that occurs when former backers, who make contribution to fund a project at an earlier stage of fund-raising period, make influences of the contribution decision of latter backers.

Crowdfunding can be classified into four categories, namely, lending-based, equity-based, reward-based, and donation-based. The primary goal of lending-based and equity-based crowdfunding is to raise capital and borrow money from a number of investors or lenders in exchange for interest payment or equity share of a company. In contrast, reward-based crowdfunding or donation-based crowdfunding requires a project initiator to create a project, which raise fund to develop a new product (e.g., private good) or enhance the public interest (e.g., public good). In this study, we focus on the two most popular crowdfunding type: reward-based and donation-based crowdfunding projects. In reward-based crowdfunding, backers (or contributors) give a small amount of money in return for a reward such as a copy of creative work or pre-sell products. In donation-based crowdfunding, backers donate to projects for gratitude and the pleasure of giving and expect no compensation in exchange