Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207188 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7797
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
crowdfunding
digital platforms
FinTech
network effects
social learning
JEL: 
D43
G23
L14
L26
L86
Document Type: 
Working Paper
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