The Dynamics of Crowdfunding: An Entrepreneurial Learning Perspective

Abstract:

The recently emergent phenomenon of IT-enabled crowdfunding has garnered much interest from practitioners and academics alike. Crowdfunding provides an effective alternative for financing a project or a venture by tapping into the general public. Pursuant to the popularity of this phenomenon, a growing corpus of academic work has been devoted to this domain. However, although many studies offer important insights into understanding the phenomenon of IT-enabled crowdfunding, most extant studies offer a somewhat static perspective, which is not sufficient to shed light on the development trajectories of successful entrepreneurs. This dissertation seeks to extend the boundary of the crowdfunding literature by examining the dynamics of crowdfunding with regard to two aspects: across- and within-campaign dynamics. These constitute two essays of the dissertation.

The first essay titled "The Path of Successful Entrepreneurs: A Fine-Grained Understanding of Prior Experience in Entrepreneurial Learning" investigates the role of prior experience in entrepreneurial success. Drawing on the theory of organizational learning, I theorize entrepreneurial learning effects from several fine-grained experience dimensions: direct/indirect, successful/failed, experience relatedness and richness. Using six years of panel data involving 3,521 serial entrepreneurs running fundraising campaigns on a popular IT-enabled crowdfunding platform, I find that entrepreneurs not only learn directly by creating and managing their own projects but also indirectly from backing others' projects. The results also suggest that the learning depreciation is more likely to occur in indirect learning. Surprisingly and more interestingly, the results show the prevalence of an "early success trap" phenomenon in entrepreneurial practices; successful founding experience is detrimental to subsequent success, and further earlier successful ones are even more destructive. Besides, the relatedness and richness may not always facilitate learning.

The second essay titled "Learning from Performance Feedback: The Dynamic Interplay Between Fundraising Patterns and Entrepreneur Strategies in Crowdfunding" examines how the fundraising patterns influence entrepreneurs' strategic actions during the course of the fundraising and how these actions in turn affect final funding performance. Building on the performance feedback model from organizational learning theory, I propose hypotheses related to the effects of performance relative to the aspiration level on entrepreneurs' explorative and exploitative actions for managing the crowdfunding campaign, the effects of strategic action taking on end-of-period project performance as well as the role of time in these relationships. Based on a unique dynamic dataset of daily observations from a leading reward-based crowdfunding platform, I find that there is a positive relationship between concurrent funding performance and entrepreneurs' probability of taking exploitative actions, and such relationship is strengthened when deadline draws near. Entrepreneurs are less likely to merely taking explorative actions, as it is usually accompanied by exploitative actions. Furthermore, entrepreneurial strategies in managing the project are shown to be effective, and those who take actions at early stages tend to harvest more.

Overall, by taking a dynamic view towards the crowdfunding phenomenon, this dissertation uncovers the across- and within- campaign dynamics in crowdfunding. It suggests that learning effects are salient in knowledge- and innovation- based work (e.g., entrepreneurship) even though much of the organizational learning research has focused on repetitive/routinized work. Entrepreneurial performance can be enhanced with the enrichment of experience. And particularly, as the entrepreneurial context is manifold and volatile, it is paramount for entrepreneurs to obtain timely feedback while at the same time seek a balance between exploitation and exploration. In addition, this dissertation offers valuable contributions to the literature in organization theory and entrepreneurship.