Crowdfunding: The Power of Collective Investment Funding decisions and the role of trust: a qualitative study of reward-based crowdfunding in the creative industries
This study examines the role of trust in influencing funder decision-making processes in crowdfunding campaigns in the creative industries. We focus on the reward-based crowdfunding (RBCF) model because of its popularity among creators in the creative industries. The RBCF model differs from the equity-based crowdfunding model in the nature of exchanges. While individual investors in equity crowdfunding receive shares in exchange for their investments, funders in RBCF campaigns receive rewards or perks according to contribution levels. For example, organizations in the creative industries offer rewards comprised of various commercial products, such as exhibit tickets and live performances and project-related products that connect funders with their brands (Thurridl and Kamleitner, 2016). Compared to other crowdfunding campaigns, some studies (e.g. Mollick, 2014) argue that investing in RBCF in the creative industries has potential risks such as undeveloped products (Zvilichovsky et al., 2015), delivery delays and other deviations from campaign promises (Appio et al., 2020). Funders also face challenges in assessing the project’s actual value due to missing benchmark and unbiased information about the reputation and legitimacy of creative organizations. Unique characteristics of the creative industries also lead to further complexities that increase the risks. For example, risk might rise in collaborations as creative organizations often instigate innovative projects in cooperation with diverse entities (Huxham and Vangen, 2005; Khaire, 2017) and firms of all sizes. Consequently, RBCF creators must ensure that they are perceived as trustworthy as they seek to fulfill their campaign promises.
Question 1
What is crowdfunding?
A type of loan from a bank
An investment strategy involving stocks
A way to raise funds by gathering small amounts from many people, typically over the internet
A business model for non-profits
A method of fundraising exclusively for artists
Question 2
What is the key difference between reward-based and equity-based crowdfunding?
Reward-based crowdfunding is only for non-profits
Reward-based crowdfunding offers a product or service in return for a donation, while equity-based crowdfunding offers part ownership of a company
Equity-based crowdfunding is illegal
Equity-based crowdfunding guarantees returns
There's no difference
Question 3
What does the success of crowdfunding campaigns like the Pebble E-Paper Watch demonstrate?
That smartwatches are the future
That crowdfunding is a guaranteed way to raise funds
That Kickstarter is the best crowdfunding platform
The potential of crowdfunding as a means to raise large sums from many contributors
That all crowdfunding campaigns raise over $10 million
Question 4
What risks are associated with crowdfunding?
Projects can fail and contributed money can be lost
Crowdfunding is always a scam
Only non-profits can lose money in crowdfunding
There are no risks associated with crowdfunding
Crowdfunding risks are only financial
Question 5
What is the significance of crowdfunding in the financial landscape?
It has no impact
It undermines traditional banking
It is a fad that will soon pass
It democratizes capital, allowing anyone with an internet connection to become an investor
Crowdfunding only benefits the rich
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