Crowdfunding as 'Donations': Theory & Evidence

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

    Research output: Working paperResearch


    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.
    Original languageEnglish
    Place of PublicationBoston
    PublisherHarvard Business School
    Number of pages37
    Publication statusPublished - 2015
    SeriesHarvard Business School Working Paper


    • Crowdfunding platforms
    • Entrepreneurial finance
    • Free-riding
    • Voluntary contributions to public goods

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