The "Love Effect" in Crowdfunding Markets: How Platform Selective Promotion of Projects Affects Value Creation

Digital platforms, as designed marketplaces governed by the platform owner, can address inefficiencies and information asymmetry problems that affect traditional markets, enhancing value-creation opportunities. However, platform governance may also introduce market distortions by directing users’ attention to few, selected offerings, leading to greater market concentration. In the context of a crowdfunding platform, Kickstarter, we examine how selective promotions of specific entrepreneurial projects, featured as ?projects we love?, help creating a market for distinctive, more innovative projects, influencing the success of the ?loved? projects as well as other projects in the platform. We find that there is a strong ?love effect? at the market category level: the higher the ratio of ?loved? projects in a project category, the higher the amount of funds a project obtains in the category, on average. This spillover effect is especially strong for more distinctive, innovative projects that depart from the prototypical product category, which are otherwise less likely to succeed (reach the amount of pledged funds). ?Love? is thus contagious. We extend the view of platforms as matchmaking devices by advancing a theoretical view of ?market scaffolding?: selective promotions, we argue, are scaffolds the platform owner uses to orchestrate and shape interactions of market participants ? creating and steering transaction opportunities towards desired value-creating domains.