Seminar on November 12, 2021

Product Development in Crowdfunding: Theoretical and Empirical Analysis

Sıdıka Tunç Candoğan, UCL School of Management

Abstract

Crowdfunding goes beyond raising funds. Entrepreneurs often use crowdfunding to solicit feedback from customers to improve their products, and may therefore prefer to launch crowdfunding campaigns for a basic version of their products with few or no enhancements (i.e., limited features). Yet, customers may not be persuaded by a campaign if a product appears too basic. In view of this trade-off, a key question for an entrepreneur is how far a product should be enhanced before launching a crowdfunding campaign. Analyzing a game-theoretical model and testing its predictions empirically, we study how a product's level of enhancement at campaign launch influences both whether an entrepreneur continues to improve the product during the campaign and whether the campaign is successful. We show that as the product's level of enhancement at campaign launch increases, the likelihood of product improvement during a campaign at first increases (because customers are more likely to provide feedback) and then decreases (because of increased production cost for the entrepreneur). Furthermore, although our theoretical model intuitively predicts that the likelihood of campaign success will always increase when an entrepreneur launches a campaign for a more enhanced product, our empirical analysis shows that the likelihood of campaign success first increases and then decreases. This counterintuitive result may be due to customers being overwhelmed with the complexity of highly enhanced products. Finally, while crowdfunding experts believe that products should be enhanced as much as possible before a campaign, we show that this is not always the best strategy.

Short Bio

Sidika is a PhD candidate in Management Science and Operations at UCL School of Management. Her research focuses on understanding and improving operations on online platforms, such as crowdsourcing platforms (e.g., InnoCentive and Topcoder) and crowdfunding platforms (e.g., Kickstarter and Indiegogo), by using game-theoretical modeling and data-driven approaches (econometric modeling and natural language processing).
Her job market paper, “Product Development in Crowdfunding: Theoretical and Empirical Analysis,” has been selected as a runner-up of the 2021 INFORMS TIMES Best Working Paper Award. Also, her paper, “Team Collaboration in Innovation Contests,” won the 2020 INFORMS TIMES Best Working Paper Award. In 2014, she was the finalist of the INFORMS Undergraduate Operations Research Prize with her teammates, and she graduated as the first ranking student from the department of Industrial Engineering, Middle East Technical University.
Sidika holds a BS (2014) and an MS (2016) in Industrial Engineering from Middle East Technical University, Turkey; and an MRes (2017) in Management Science and Operations from UCL School of Management, UK.

Venue

Friday, November 12, 2021, 4.00 pm - Zoom Meeting