MAKE IT CR3ATIVE – The effect of product creativity on crowdfunding performance

MAKE IT CR3ATIVE – The effect of product creativity on crowdfunding performance Christian V. Baccarella, Friedrich-Alexander University Erlangen-Nürnberg & Martin Meinel Friedrich-Alexander University Erlangen-Nürnberg &... [ view full abstract ]

MAKE IT CR3ATIVE – The effect of product creativity on crowdfunding performance

Christian V. Baccarella,
Friedrich-Alexander University Erlangen-Nürnberg
&
Martin Meinel
Friedrich-Alexander University Erlangen-Nürnberg
&
Timm F. Trefzger
Friedrich-Alexander University Erlangen-Nürnberg
&
Kai-Ingo Voigt
Friedrich-Alexander University Erlangen-Nürnberg

Purpose
Technological innovations play an increasingly important role in our lives and even former “simple products” are getting progressively equipped with technologies. Interestingly, more and more technology-induced innovations are not developed by large companies, but by startups, visionary tinkerers, or even “normal” consumers (von Hippel et al. 2011). A typical and mostly decisive obstacle for new ventures is, however, acquiring financial resources, which are needed to pursue innovation endeavors (Cassar 2004).
As an alternative to other possibilities of financing new ventures, crowdfunding has recently gained a lot of attention (Mollick 2014). Typically, capital-seeking individuals or teams present their projects on online crowdfunding platforms such as Kickstarter or Indiegogo. However, empirical literature about factors influencing crowdfunding performance is scarce. In that context, we assume that product creativity, reflecting both product originality and usefulness (Amabile 1983), can explain why some crowdfunding projects are exceedingly successful. Against this background, the aim of this study is to examine the effect of product creativity on crowdfunding performance.

Theoretical background
Generally, crowdfunding can be defined as “the efforts by entrepreneurial individuals and groups […] to fund their ventures by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries” (Mollick 2014, p. 2). The majority of empirical research on crowdfunding focuses on identifying features in the depiction of crowdfunding campaigns leading to success. Mollick (2014), for example, finds that quality signals, such as videos or frequent updates increase success. Furthermore, Kuppuswamy and Bayus (2013) show the importance of information regarding previous backers’ funding decisions. Most recently, the study of Chen et al. (2016) finds that the funding levels of functional products are generally higher than those of hedonic ones.
We assume that product creativity is another central success factor of crowdfunding projects. Regardless of the domain, creativity generally refers to an outcome, which is both novel and appropriate (Amabile 1983). Considering a product as the outcome of a creative process, Cropley & Kaufman (2012) developed the concept of functional creativity revealing five dimensions of creative products. First, Relevance and Effectiveness illustrates whether and how a product serves its purpose. Second, Problematization represents the extent to which a product points out shortcomings in existing solutions. Third, Propulsion refers to a product’s novelty and indicates to which degree the product is original and surprising. Fourth, Elegance reflects whether a product is perceived as neat or well-done. Fifth, Genesis describes a product’s capacity of redefining a domain.
Following this model of functional creativity, we argue that each of the dimensions has a positive influence on the general perception of a product. Consequently, products that are more creative are likely to have a better chance of convincing potential backers to invest in respective crowdfunding projects than less creative products. Subsequently, we postulate a positive effect of product creativity on crowdfunding performance:

Hypotheses 1-5: Product creativity [dimension 1-5] has a positive influence on crowdfunding performance.

Methodology
To analyze the effect of product creativity on funding performance we applied content analysis, which is a well-established method to reveal non-obvious patterns. For our study, we chose Kickstarter as one of the most successful online crowdfunding platforms. Kickstarter has been used to realize many projects across various domains. To fund a project, supporters can donate a certain amount of money in return for a defined reward. If a project reaches its funding goal (“all-or-nothing”-principle) in a given funding period, the creators receive the money to realize their project. Up to now, over 100,000 Kickstarter projects were successfully financed raising about $2.4 billion of capital (www.kickstarter.com).
Due to the scope of our study, we focused on successful projects tagged with technology. We accessed the projects on November 9th 2015. Overall, our search resulted in 3,592 projects. Out of these, we took a randomized sample of 200 projects. All projects were saved offline to guarantee that no information would be added during the coding procedure. Two teams of judges separately coded the complete sample based on a provided coding scheme. In case of disagreement, issues were resolved through discussion among the team members. Prior to the actual coding, coding teams were briefed on the research objects and the coding scheme, and a set of ten projects (which were not part of our sample) were analyzed and discussed.
As independent variables, product creativity was assessed by using Cropley and Kaufman’s (2012) revised Creative Solution Diagnosis Scale (CSDS), which comprises five creativity dimensions (24 items). After removing three ill-fitting items, EFA confirmed the five-dimensional structure.
As dependent variable, we obtained the natural logarithm of each project’s total funds raised. Furthermore, we included five control variables, namely the logarithmically transformed quantity of updates, technological complexity, innovativeness, duration, and US-based campaigns. For all items, intercoder agreement was in excellent range.

Initial results and implications
To test our hypotheses, we conducted linear regression analysis. Our initial results find support for significant positive effects of the dimensions Elegance (p ≤ .01), Relevance and Effectiveness (p ≤ .05) and Genesis (p ≤ .05). For the remaining two dimensions, however, we could not find any support. The results indicate that especially those projects perform well, where products offer aesthetic superiority, an obvious purpose and a basis for novel solutions.
The mechanism and the interplay of factors influencing crowdfunding success are still not fully understood. Hence, our study sheds light on the impact of product creativity on crowdfunding project performance. By being the first study to assess product creativity across different product categories in a crowdfunding setting, we provide a first step to better understand the role of product creativity in an open innovation environment. Moreover, our study will offer useful insights and guidance for crowdfunding campaign creators to maximize their crowdfunding performance.


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