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Crowdfunding has emerged as a revolutionary financing model that allows project creators (entrepreneurs) to raise capital from a large group of backers (investors). However, little is known regarding how backers are attracted and convinced to make a financial support. The primary purpose of this study is to fill this gap by introducing a persuasion theory of Elaboration Likelihood Model (ELM) into the domain of crowdfunding and by investigating the communication process between creators and backers, hoping to not only offer insights into the emerging financing model of crowdfunding, but also shed light more generally on the ways we understand financial reporting and disclosures. Guided by ELM, we first identify several new characteristics that have a significant influence on backers’ funding decisions through central and peripheral routes. Second, we find that there is a complementary effect between information disclosed in narratives and multimedia formats. Third, we find that there is a synergic effect between argument quality and source credibility of project communications. Fourth, we provide evidence that the influence of project communications are moderated by the inherent quality of the project. In other words, although project communications are very important, the degree of funding success (funding ratio, calculated by dividing fund raised by fund required) of a project is largely driven by its inherent project quality, especially for those projects with high degree of success. Fifth, we offer evidence and explanations to reconcile the mixed results regarding the influence of campaign duration on funding success. Specifically, we find that campaign duration has negative impacts on unfunded projects but positive impacts on funded projects. We also provide discussions regarding theoretical and practical implications, limitations, and future research directions.
Mi Zhou, Virginia Tech University
Weiguo Fan, Virginia Tech University
Alan Wang, Virginia Tech University
Linda Wallace, Virginia Tech University