“The more options, the better?” Investigating the impact of the number of options on backers’ decisions in reward-based crowdfunding projects

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Abstract

The number of options in reward-based crowdfunding projects plays an important role in influencing backers’ decisions. However, prior studies provided two-pronged outcomes for the impact on the backers’ decision of supporting a project. They also neglected the impact on the backers’ decision on which option to select. Anchored on the theories of assortment decisions, we found that the number of options has an inverted U-shaped relationship with the backers’ decision on supporting a crowdfunding project. It also has a significant impact on the backers’ decision on selecting an option. Three studies were conducted, and they collectively provided a piece of solid evidence to our findings.

Introduction

The impact of an increased number of options on the backers’ decision of supporting a reward-based project has become the most prevalent topic of online crowdfunding research [10,29,53,62,88]. In a conventional reward-based project, fundraisers usually provide several options with various funding prices and yields to backers. Backers then decide to choose a preferred option if they want to support the project [54]. In this regard, the investigation of this research topic should focus not only on how the number of options influences the backers’ decision on whether to support a reward-based project but also on its impact on the backers’ decision on which option to choose.

There are two salient research gaps in extant studies of the impact of the number of options. The first gap pertains to the dichotomized outcomes on examining this research issue. Some researchers found that a large number of options are beneficial for a crowdfunding project. This is because there is a high likelihood that a large number of options can satisfy the diverse interests and motivations of backers [53,69]. However, the findings of other researchers were opposite [12,91]. They argued that choice overload causes a negative impact [16,78].

Second, there is a dearth of studies that examined the impact of the number of options on backers’ decisions on selecting an option. In this paper, we use the backers’ backing centroid to depict the backers’ decision on selecting an option. The backers’ backing centroid refers to a pseudo point whose coordinates are the averages of the corresponding coordinates of a given set of backers’ actual selection of the options. In a conventional reward-based crowdfunding project, backers are free to select any option. Fundraisers are also free to set the number of options. To avoid a biased selection, the expected utility of each option in a crowdfunding project would be similar [66]. In other words, the high value yield of an option usually comes with a high level of cost on investment. In this regard, the number of options turns out to be the salient factor that influences the backers’ decision behavior. If fundraisers do not know the relationship between the number of options and backers’ backing centroid, they could not place the designated option in the most interest-attracting portion. Thus, the examination of the impact of the number of options on the backers’ backing centroid could provide significant implications to guide a thoughtful design of a reward-based project, which in turn improves the likelihood of achieving a desirable funding result.

Two research questions are addressed: (1) What is the impact of the number of options on the backers’ decision on whether to support a reward-based crowdfunding project? (2) What is the impact of the number of options on the backers’ backing centroid? We anchor on the theories and literature from assortment research decisions [24,33,86], as well as the design of reward scheme in a crowdfunding project [12]. We propose that the number of options could have an inverted U-shaped relationship with the backers’ decision on whether to support a crowdfunding project, which is subsequently manifested by the success of reward-based projects [95]. At the same time, however, the number of options has a negative impact on the backers’ backing centroid. To investigate our conception, we conducted three consecutive studies. All these studies provided positive support with a specific methodological perspective. An econometric analysis was conducted for validating the hypotheses with a large field dataset. This is followed by a laboratory experimental study and an eye tracking experimental study for strengthening the solid evidence on the causal relationship of the impact of the number of options on the backers’ decision of supporting a crowdfunding project and on the backing centroid, respectively.

To the best of our knowledge, this paper is a pioneer one that explores the underlying mechanism of how the number of options will influence the backers’ decision in the reward-based crowdfunding. It provides four-fold contributions to scholars and practitioners. Table 1 summarizes the intended contributions and the brief justifications.

Section snippets

Literature review

Previous research suggests that the backers’ decision could be decomposed into two parts: (1) whether to support a crowdfunding project by choosing an option and (2) which option should be chosen [23]. According to the literature of human decision-making, these two parts of decision could be invoked without a predefined order in the backers’ decision-making [33]. In some cases, backers may first consider whether to support a crowdfunding project and then make the decision of choosing a

Dependent variable development

In this paper, we investigate the impact of the number of options on the backers’ decision-making in reward-based crowdfunding. Specifically, we examine backers’ decisions on whether to support a reward-based project and which option to choose. Considering the nature of a reward-based project, we use the success of a reward-based project to manifest the backers’ decision-making on whether to support a project. It is because the funding outcome of a crowdfunding project is a collection of the

Research method

We employ a mixed-method research design to validate our hypotheses. As Mingers suggested, mixed-method research could get richer and more reliable results [64]. Particularly, the endogenous methodological limitation of any single research method may prevent us from identifying the eloquent supports for the following issues:

(1) Can strong support be obtained to validate our hypotheses under the online reward-based crowdfunding field data context by considering different settings of the

Discussion of findings

On the basis of the analysis results from the three consecutive studies, this paper provides solid evidence to support the inverted U-shaped impact of the number of options on the success of reward-based projects in crowdfunding, as well as a negative impact on the backers’ backing centroid. During the data analysis process, we adopted most of the contingent factors in prior crowdfunding studies as the control variables in our model, and the results of the analysis were significant [92]. Thus,

Conclusions

The current research discusses how the number of options in reward-based crowdfunding projects can be utilized to enhance the success of the projects. Essentially, we find that the number of options could have an inverted U-shaped impact on the likelihood of having a successful crowdfunding project. At the same time, it has a negative impact on the backers’ backing centroid. Hence, this study is a modest step toward the development of a theoretically sound explanation to the underlying

Acknowledgements

This paper is supported by the National Natural Science Foundation of China (71331007). It is also partially supported by the General Research Fund from Research Grants Council of the Hong Kong Special Administrative Region, China (12500118).

Zhao Du is an associate professor in Data Science at School of Sports Engineering and a master instructor at Sports Business School, Beijing Sport University. She is also the chief engineer of Information & Network Center, Beijing Sport University. She received her Ph.D. degree in Information Systems from Renmin University of China and Masters’ degree in Computer Science from Tsinghua University. Her work has been published in premium information system conferences such as the Americas

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      Citation Excerpt :

      This study focuses on reward-based crowdfunding, where individuals backing campaigns receive tangible rewards instead of financial incentives [3]. Most reward-based campaigns are unique in terms of their creativity, novelty, originality, and design [4,5]. The desire for early accessibility to creative rewards can motivate backers’ decisions to invest in pre-ordering [6].

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    Zhao Du is an associate professor in Data Science at School of Sports Engineering and a master instructor at Sports Business School, Beijing Sport University. She is also the chief engineer of Information & Network Center, Beijing Sport University. She received her Ph.D. degree in Information Systems from Renmin University of China and Masters’ degree in Computer Science from Tsinghua University. Her work has been published in premium information system conferences such as the Americas Conference on Information Systems and the Pacific Asia Conference on Information Systems. Her research interests include crowdfunding, e-learning, social network and design science.

    Mengxiang Li is an assistant professor of Information Systems at the Department of Finance and Decision Sciences, School of Business, Hong Kong Baptist University. He received his Ph.D. degree in Information Systems from the City University of Hong Kong. He has coauthored in leading information systems journals, such as MIS Quarterly, Journal of Management Information Systems, Information & Management, Decision Support Systems, and International Journal of Electronic Commerce. His articles appeared in premium information system conferences such as the International Conference on Information Systems and the Pacific Asia Conference on Information Systems. His current research interests include the business information systems and analytics, user-centered technology design, digital commerce, innovation and IT implementation, and NeuroIS.

    Kanliang Wang is a professor of Information Systems at the Department of Management Science and Engineering, School of Business, Renmin University of China. He is the Associate Dean of the School of Business. His articles have appeared in leading information systems conferences and journals such as MIS Quarterly, Information & Management, Decision Support Systems, and Information Systems Frontiers. His current research interests include crowdsourcing, online personalization, and digital commerce.

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