Unique Challenges of Decision-Making Process on Crowdfunding Platforms - An Exploratory Study

Abstract

Crowdfunding gives opportunities to novice entrepreneurs to raise funding for their novel ideas. However, lack of monitoring of projects and funds coupled with the lack of experience of project initiators create high levels of uncertainty for potential funders. In this study, we aim to examine how funders’ decision making process is affected by different types of uncertainty related to the project initiators. Unlike traditional e-commerce where consumers buy a finished product, in patronage based crowdfunding platforms, funders invest in and buy a product that is yet to be finished. This creates a unique uncertainty based on project initiators’ competence. Our results show that uncertainty based on project initiators’ competence and opportunism increase product performance uncertainty. Moreover, the dynamics of project initiator and product uncertainty are affected by the complexity of the product.