Mental representations on crowdfunding decisions
Research Paper Title:
“Launching for success: the effects of psychological distance and mental simulation on funding decisions and crowdfunding performance”
Authors:
Stefan Rose (RWTH Aachen University)
Daniel Wentzel (RWTH Aachen University)
Christian Hopp (RWTH Aachen University)
Jermain Kaminski (Maastricht University)
Background:
If you can dream it, you can fund it. Investing in a crowdfunding campaign means investing into a future product. As investors cannot draw on actual experiences with the product, they have to form a mental representation of the product based on textual and visual information that is provided. Depending on the development stage of a product and its time to delivery, the mental representation conditions a lower or higher psychological distance. Perceptions of psychological distance are consequential as they inhibit campaign contributions and reduce the probability of funding the product.
Methodology:
Sample: Kickstarter campaigns (field data)
Sample Size: 961
Analytical Approach: Four controlled experimental studies, Observational analysis with field data
Hypothesis:
Reward-based crowdfunding campaigns that (a) display products in a less advanced development stage or (b) claim to deliver the products in the distant future are less likely to receive support from potential backers. (supported)
The effects of product development stage and time to delivery on willingness to support are mediated by psychological distance. (supported)
For campaigns that (a) display products in a less advanced development stage or (b) claim to deliver the product in the distant future, outcome simulation will lead to a greater willingness to contribute to the campaign than will process simulation. (supported)
For campaigns that (a) display products in a more advanced development stage or (b) claim to deliver the product in the near future, process simulation will lead to a greater willingness to contribute to the campaign than will outcome simulation. (not supported)
Results:
The researchers explore how backers form mental representations of crowdfunding campaigns.
Mental representations depend on the psychological distance that backers experience.
Psychological distance, in turn, is determined by structural campaign characteristics.
Potential backers are less willing to support psychologically distant campaigns.
Mental simulation improves evaluations of psychologically distant campaigns.
Conclusion:
This research study shows that two crowdfunding campaign characteristics, product stage and time to delivery, determine the psychological distance to a presented product, which, in turn, affects the effectiveness of a campaign. A naive conclusion from this finding is that entrepreneurs should launch crowdfunding campaigns only after they have finalized the product development process and/or are able to deliver the product in the near future. However, as the experiments show, encouraging potential funders to engage in more abstract outcome simulation ("Why?", "What can I eventually achieve by using the product?") seems an effective strategy to enhance the willingness to invest into products with a less advanced development stage, or more distant expected time of delivery.