Beyond Words: An Experimental Study of Signaling in Crowdfunding

Increasingly, crowdfunding is transforming financing for many people worldwide. Yet we know relatively little about how, why, and when funding outcomes are impacted by signaling between funders. We conduct two studies of and participants involved in crowdfunding to investigate the effect of "crowd signals,"i.e., certain characteristics deduced from the amounts and timing of contributions, on the decision to fund. In our first study, we find that, under a variety of conditions, contributions of heterogeneous amounts arriving at varying time intervals are significantly more likely to be selected than homogeneous contribution amounts and times. The impact of signaling is strongest among participants who are susceptible to social influence. The effect is remarkably general across different project types, fundraising goals, participant interest in the projects, and participants' altruistic attitudes. Our second study using less strict controls indicates that the role of crowd signals in decision-making is typically unrecognized by participants. Our results underscore the fundamental nature of social signaling in crowdfunding. They highlight the importance of designing around these crowd signals and inform user strategies both on the project creator and funder side.