Devil in the Detail (or not)? A Study of Crowdsourcing Performance of Entrepreneurial Projects

Crowdfunding is a growing phenomenon that complements conventional channels for entrepreneurial financing. While existing research has explained some behavioral patterns of crowdfunders, a further understanding regarding what factors affect a crowdfunder’s decision making and subsequent crowdfunding outcome is needed. In this paper, I draw on the literature of entrepreneurial financing, the research on crowdfunding, and the literature of knowledge and recombinant innovation to study how crowdfunding outcome is affected by the entrepreneurs’ knowledge transfer strategy. I argue for an inverted-U relation between entrepreneurs’ explanation of technical details for a technology project and its funding performance. In particular, both excessive explanation of technical details and lack thereof may impede the knowledge flow from entrepreneurs to crowdfunders, in turn leading to a lowered funding performance. Using a combination of agent-based modeling and empirical data from a leading crowdfunding community, I find evidence consistent with my hypotheses.