Thomas Lambert () and
No 7797, CESifo Working Paper Series from CESifo Group Munich
Various forms of social learning and network effects are at work on crowdfunding platforms, giving rise to informational and payoff externalities. We use novel entrepreneur-backer data to study how these externalities shape funding dynamics, within and across projects. We find that backers decide to back a particular project based on past contributions not only to that project—as documented by prior work—but also to other contemporaneous projects—a novel result. Our difference-in-differences estimates indicate that such ‘cross-project funding dynamics’ account for 4-5% in the increase of contributions that projects generate on a daily basis. We show that recurrent backers are the main transmission channel of cross-project funding dynamics: by initiating social learning about project existence and quality, recurrent backers encourage future funding by other backers. Our results demonstrate that even though contemporaneous projects compete for funding, they jointly benefit from their common presence on the platform. We finally show that these crowdfunding dynamics stir platform growth, with important consequences for competition among platforms.
Keywords: crowdfunding; digital platforms; FinTech; network effects; social learning (search for similar items in EconPapers)
JEL-codes: D43 G23 L14 L26 L86 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-net, nep-pay, nep-ppm and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7797
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