(The) effect of sponsorship signals on performance of reward-based crowdfunding projects

Abstract

Crowdfunding is a method of raising funds from an unspecified number of people through online platforms, etc., and is divided into reward-based, donation-based, lending-based and equity-based by its purpose. Among them, reward-based crowdfunding is a fundraising strategy in which small companies or startups receive funds from an unspecified number of people and provide products or services as rewards. In general, reward-based crowdfunding projects offer products or services that have not been sufficiently verified in the market as rewards, so mitigating uncertainty and building trust serves as a good strategy to make the project successful. Naver HappyBean, a reward-based crowdfunding platform, has reorganized its platform since May 2019 to expose sponsorship signals to thumbnails and product pages if a project is developed with sponsorship from public institutions or large companies. This study demonstrates that exposing sponsorship signals on reward-based crowdfunding platforms has a positive impact on the project's performance using DiD(Difference-in- Differences) estimation, which is commonly used to study the effectiveness of policies. This study reveals the meaning of sponsorship signals in reward-based crowdfunding platforms and provides practical insights to both platform providers and project founders.