Crowdfunding performance, market performance, and the moderating roles of product innovativeness and experts' judgment: Evidence from the movie industry
Paolo Roma, Angelo Natalicchio, Umberto Panniello, Maria Vasi, Antonio Messeni Petruzzelli
kHUB post date: June 27, 2023
Originally published: January 26, 2023 (PDMA JPIM • Vol 40, Issue 3 • May 2023)
Read time: 75 minutes
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Reward-based crowdfunding (CF) has emerged as a method to solicit funds for innovative projects. Yet, little is still known about the ability of reward-based CF to act as a signal in the eyes of future consumers, and thus boost the future market performance of new products that innovators intend to commercialize using the campaign funds. In addition, scant research has clarified the boundary conditions that can magnify or weaken the efficacy of this CF signal. Given the relevance of reward-based CF for supporting innovation, understanding when the CF campaign performance works as an effective signal is of great interest, especially in business settings characterized by high product quality uncertainty. By using the movie industry as a setting, we contribute to fill this gap. Specifically, we argue that the positive effect of the reward-based CF performance is moderated by two important factors influencing consumers' purchase decisions: the degree of product innovativeness and the expert judgment about the product. Elaborating on the effects of product innovativeness, we posit that this product feature should moderate the positive relationship between CF and subsequent market performances in an inverted U-shaped fashion. Favorable expert recommendations, on the other hand, should weaken the efficacy of the CF performance as a signal. Results from a sample of 1059 new movies (of which 152 released in theaters) confirm these predictions and offer several remarkable implications for innovators.
Practitioner points
- We suggest innovators to invest time and effort designing attractive reward-based crowdfunding (CF) campaigns able to ignite commitments from the crowd, which are not only beneficial per se, but also yield valuable information that can influence consumers’ purchase decisions, and thus lead to a positive market performance.
- To improve the odds of success in the market stage, we advise innovators to fine-tune the communication strategy during and after the CF campaign depending on the degree of product innovativeness, trying to soften the downsides of an ultra-innovative product by explaining novel features and increasing consumers’ familiarity with new meanings, styles, and technological aspects of the product.
- Innovators should be aware that a good performance in reward-based CF may serve most suitably as a product quality signal for consumers when expert judgments are not particularly favorable.
- It is an essential task for innovators to identify the relevant product quality signals (from both the crowd and experts), understand their interplay, and work to enhance the benefits of favorable signals and mitigate the effects of negative ones.