Crowdfunding as 'Donations': Theory & Evidence

Kevin J. Boudreau; Lars Bo Jeppesen; Toke  Reichstein; Francesco  Rullani

Working Paper | HBS Working Paper Series | 2015

Crowdfunding as 'Donations': Theory & Evidence

by Kevin J. Boudreau, Lars Bo Jeppesen, Toke Reichstein and Francesco Rullani

Abstract

For a wide class of crowdfunding approaches, we argue that the reward structure (for funders) is closer to that of charitable donations to public goods than it is to traditional entrepreneurial finance. Many features of the design of crowdfunding platforms can therefore be understood as attempts to deal with attendant "free-rider" problems in motivating contributions. Reviewing institutional features of today's crowdfunding, we clarify that there are often limits in the extent to which tangible rewards can be used to motivate contributions. Drawing on analogies with charitable donations, we theorize that intangible sources of motivation—(i) direct psychological rewards, (ii) reciprocity and (iii) social interactions—can play a role in entrepreneurial crowdfunding. In our detailed empirical analysis of a representative project we find abundant evidence consistent with this characterization and we proceed to discuss implications for platform design and entrepreneurial funding and unique and defining characteristics of crowdfunding.

Keywords: Crowdfunding platforms; entrepreneurial finance; free-riding; voluntary contributions to public goods; Online Technology; Entrepreneurship; Social and Collaborative Networks; Finance; Philanthropy and Charitable Giving;

Language: English

Format: Print

37 pages

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Citation:

Boudreau, Kevin J., Lars Bo Jeppesen, Toke Reichstein, and Francesco Rullani. "Crowdfunding as 'Donations': Theory & Evidence." Harvard Business School Working Paper, No. 16-038, September 2015.

Article | Management Science | October 2016

Looking Across and Looking Beyond the Knowledge Frontier: Intellectual Distance and Resource Allocation in Science

Kevin J. Boudreau, Eva Guinan, Karim R. Lakhani and Christoph Riedl

Selecting among alternative innovative projects is a core management task in all innovating organizations. In this paper, we focus on the evaluation of frontier scientific research projects. We argue that the "intellectual distance" between the knowledge embodied in research proposals and an evaluator's own expertise systematically relates to the evaluations given (and consequent resource allocation). We empirically evaluate effects in data collected from a grant proposal process at a leading research university in which we randomized the assignment of evaluators and proposals to generate 2,130 evaluator-proposal pairs. We find evaluators systematically give lower scores to research proposals closer to their own areas of expertise and to highly novel research proposals. We interpret the empirical patterns in relation to a range of theoretical mechanisms and discuss implications for policy, managerial intervention, and allocation of resources in the ongoing accumulation of scientific knowledge.

Keywords: knowledge; innovation; novelty; evaluation; resource allocation; Resource Allocation; Decision Choices and Conditions; Innovation and Management; Science-Based Business; Experience and Expertise;

Citation:

Boudreau, Kevin J., Eva Guinan, Karim R. Lakhani, and Christoph Riedl. "Looking Across and Looking Beyond the Knowledge Frontier: Intellectual Distance and Resource Allocation in Science." Management Science 62, no. 10 (October 2016). View Details

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This paper discusses several challenges in designing field experiments to better understand how organizational and institutional design shapes innovation outcomes and the production of knowledge. We proceed to describe the field experimental research program carried out by our Crowd Innovation Laboratory at Harvard University to clarify how we have attempted to address these research design challenges. This program has simultaneously solved important practical innovation problems for partner organizations, like NASA and Harvard Medical School, while contributing research advances, particularly in relation to innovation contests and tournaments.

The practice and teaching of business strategy today exist largely as a set of alternative views and frameworks not entirely connected to one another. These notes contribute an integrated sequence of steps for creating or evaluating a strategy and associated company design. These notes also draw clear lines from these things to quantitative and evidence-based evaluation of enterprise performance and to financial valuation. The approach is generalizable to any modern industry and integrates existing well-known frameworks. The materials are consistent with what is known from modern graduate school training and are geared to practical use by managers or teaching by instructors of MBAs and executive MBAs.

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Crowdfunding as 'Donations': Theory & Evidence

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