The Influence of Fixed and Flexible Funding Mechanisms on Reward-Based Crowdfunding Success

This study examined whether fixed or flexible funding mechanisms influence crowdfunding success. Under the fixed funding mechanism, the pledges contributed to the crowdfunding campaign projects are returned to the backers if the project fails, whereas, under the flexible funding mechanism, the project creator can keep all the raised pledges, irrespective of whether the project succeeds or fails. Secondary data consisted of reward-based crowdfunding projects retrieved from The Crowd Data Centre. Logistic regression was employed to respond to research objectives. The results reveal that the fixed funding mechanism increases the probability of success more than flexible funding. Entrepreneur experience, spelling errors, and project description negatively affect crowdfunding success, and backers positively affect crowdfunding success. The findings guide entrepreneurs seeking financing to design and choose an appropriate funding mechanism that effectively reduces the failure rate. Although many entrepreneurs seek funding in the crowdfunding market, relatively little research has been conducted on the influence of flexible or fixed funding mechanisms on crowdfunding success in Africa. This study provides entrepreneurs with appropriate financing strategies that enhance crowdfunding success. The empirical literature indicates that the flexible funding mechanism creates distrust among backers due to unrealistic target amounts.

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Publication Details

Journal
Journal of risk and financial management
Published
2024-10-07
DOI
https://doi.org/10.3390/jrfm17100454
Citations
2
Primary Topic
FinTech, Crowdfunding, Digital Finance
Type
article
Field-Weighted Citation Impact
1.06
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article

The Influence of Fixed and Flexible Funding Mechanisms on Reward-Based Crowdfunding Success

Athenia Bongani Sibindi, Lenny Phulong Mamaro
2 citations
Journal of risk and financial management
FinTech, Crowdfunding, Digital Finance
1.06
article

The Influence of Fixed and Flexible Funding Mechanisms on Reward-Based Crowdfunding Success

Athenia Bongani Sibindi, Lenny Phulong Mamaro
article en
2 citations

Abstract

This study examined whether fixed or flexible funding mechanisms influence crowdfunding success. Under the fixed funding mechanism, the pledges contributed to the crowdfunding campaign projects are returned to the backers if the project fails, whereas, under the flexible funding mechanism, the project creator can keep all the raised pledges, irrespective of whether the project succeeds or fails. Secondary data consisted of reward-based crowdfunding projects retrieved from The Crowd Data Centre. Logistic regression was employed to respond to research objectives. The results reveal that the fixed funding mechanism increases the probability of success more than flexible funding. Entrepreneur experience, spelling errors, and project description negatively affect crowdfunding success, and backers positively affect crowdfunding success. The findings guide entrepreneurs seeking financing to design and choose an appropriate funding mechanism that effectively reduces the failure rate. Although many entrepreneurs seek funding in the crowdfunding market, relatively little research has been conducted on the influence of flexible or fixed funding mechanisms on crowdfunding success in Africa. This study provides entrepreneurs with appropriate financing strategies that enhance crowdfunding success. The empirical literature indicates that the flexible funding mechanism creates distrust among backers due to unrealistic target amounts.

Journal of risk and financial managementVol. 17(10)
University of South Africa (ZA)
Openalex Percentile: Top 17%
FinTech, Crowdfunding, Digital Finance
1.06
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