The effect of reward structure components
in crowdfunding
Master thesis by Jorn Mischa van Zwanenburg (11150327)
Final version, submitted on 23-06-2016
University of Amsterdam
Faculty of Economics & Business
Msc. Business Administration
Track: Management & Entrepreneurship in the Creative Industries
Supervised by: Angelo Tomaselli
Abstract
Little is known about the effect a reward structure has on donation size and project funding.
The recent phenomenon crowdfunding presents itself as an interesting and relevant setting to
explore this. Backers of crowdfunding projects exhibit philanthropic behavior mixed with
reward-based motivations, which is unprecedented. By collecting data on 155 projects
proposed on the Dutch, reward-based crowdfunding platform Cinecrowd, this study aims to
identify components of a reward structure that affect the individual donation size. The results
of this study show that the number of reward categories has a negative impact on the donation
size, while the monetary accessibility of these reward categories has a positive effect on the
donation size. In relation to the content of the rewards, neither social recognition nor high
project involvement were found to significantly impact the donation size. Moreover, it was
found that project backers opting not to receive a reward contributed lower amounts than
project backers opting to receive rewards. Due to the limitations of this study, future research
on the effect of social recognition and high project involvement in the context of a reward
structure in relation to individual donation size is recommended.
Statement of Originality
This document is written by Student Jorn Mischa van Zwanenburg, who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
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Index
1.Introduction ... 2 2. Theoretical background ... 5 2.1 Charitable giving ... 5 2.2 Reward-based crowdfunding ... 9 2.3 Motivation ... 12 2.4 Rewards ... 15 3. Hypothesis development ... 18 3.1 Reward categories ... 18 3.2 Reward content ... 214. Research design and methodology ... 24
4.1 Empirical setting ... 24 4.2 Data collection ... 25 4.3 Measures ... 25 4.4 Analytical approach ... 29 5. Results ... 31 5.1 Descriptive statistics ... 31 5.2 Correlations ... 33 5.3 Regression analyses ... 36 6. Discussion ... 39 6.1 Theoretical contributions ... 39 6.2 Practical implications ... 46
6.3 Limitations and future directions ... 47
7. Conclusion ... 50
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1.Introduction
What drives people to give money voluntarily and what leads to them giving more? These
questions have been raising scholarly attention since the advent of philanthropy and in recent
years society is becoming increasingly connected through the internet, introducing novel
formats of philanthropy. Moreover, the tools offered on the web to activate people to support
a cause are numerous. Because of this digital revolution, charitable behavior does not only
occur for humanitarian or social causes any longer, but has been used to assist in the creation
of an large variety of projects such as music albums, websites, videogames, green technology
and movies.
Due to the rise of the internet, a concept has emerged that connects initiators of a large
variety of projects with potential funders of these projects and this concept is called
crowdfunding. At the moment of writing, there are near to 2000 global crowdfunding
platforms and in 2015, $34.4 billion was raised by crowdfunding platforms (Colombo et al.,
2015). The basics of crowdfunding are simple and best explained by Mollick (2014, pp.2) as; “Crowdfunding refers to the efforts by entrepreneurial individuals and groups – cultural,
social, and for-profit – to fund their ventures by drawing on relatively small contributions
from a relatively large number of individuals using the internet, without standard financial intermediaries”. There are several formats for crowdfunding and this study focusses on the
reward-based model of crowdfunding. In this model, project backers henceforth backers,
receive a reward in return for their contribution. This reward system is constructed by the
entrepreneurs, henceforth crowdfounders, and can vary from receiving the intended product,
taking part in the development of the project or small material benefits. This study focusses
on the effect of non-product related rewards and a reward system on the giving behavior of
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The reward structure of crowdfunding projects has been found to impact backer behavior and
crowdfunding success (Antonenko et al., 2015; Cholakova & Clarysse, 2014; Wiggins &
Ellis, 2011; Mollick, 2014), though little is known about how the structure and content of the
rewards impact the donating behavior of backers.
To examine the behavior of project backers in reward-based crowdfunding, the most
prevalent field of literature explaining this behavior is the field studying philanthropy.
Although there is an extensive body of literature on charitable giving (Bekkers & Wiepking,
2011; Green and Webb, 1997; Kottasz, 2004; Harbaugh, 1998), the effect of rewards is
largely ignored. Foundational to human reaction to rewards is human motivation, which has
been studied and thoroughly elaborated on by Ryan and Deci (1985; 2000) and Deci et al. (1989; 2001).To the best of the authors’ knowledge, none of the abovementioned studies in
both crowdfunding and charitable giving examine the components of a reward structure that
influence the funding behavior of project backers. Therefore, this study attempts to add to our
understanding on the effect of rewards on donating behavior. The main question this research
is concerned with is; Which components of a reward structure affect the individual donation
size?
Through this research question, the aim of this study is to fill the gap relating to the
effect of a reward structure on individual donations. The results produced by this study
contribute to the findings by Andreoni and Petrie (2004),who argued that rewards and the
structuring of rewards affect fundraising success, but failed to identify the elements of a
reward structure that affected this. This study adds to this finding by indicating the specific
components of a reward structure that impact that donation size. In the same way, this study
contributes to research on crowdfunding success (Antonenko et al., 2015; Cholakova &
Clarysse, 2014; Wiggins & Ellis, 2011; Mollick, 2014). Mogilner et al. (2008), Wiltermuth
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behavior in several contexts, however, not in the context of donations. Our findings adds to
the results of these studies by assessing the effect of categorization on donating behavior.
To answer this research question, two sets of hypotheses were created. The first set
consist out of two hypotheses which relate to the categorization of rewards and examines the
effect of the number of reward categories and the average price of these reward categories.
The second set of two hypotheses relates to the content of the rewards. It was tested whether a
reward distributing social recognition and a reward allowing a project backer to be highly,
personally involved in the project are appealing enough to impact the donation size.
To test these hypotheses, data on 155 projects proposed on the Dutch crowdfunding
platform Cinecrowd was collected. Cinecrowd serves as the empirical setting for this study
and employs the model of reward-based crowdfunding. The projects proposed on Cinecrowd
are solely concerned with movies and every project utilizes a self-designed reward structure to
try and obtain the most funding. The empirical setting reward-based crowdfunding allows us
to test the constructed hypotheses which will guide the exploration of the antecedents of a
reward structure affecting donation sizes.
The thesis is structured as follows. In the following section, a theoretical background
section is presented in which literature on charitable giving for explaining donating behavior
is presented, followed by the most prevalent findings on reward-based crowdfunding and
backer incentives. Then, the theoretical background examines theory on motivation and
rewards. In the third section, the theories leading to the hypotheses, the hypotheses
themselves and a theoretical model are presented. Fourth, the research methodology of this
study is discussed and the measures for our statistical analysis are operationalized. In the fifth
section, the results are displayed and these results are discussed in the sixth section. In section
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2. Theoretical background
In the following section, the theoretical foundation of this study will be discussed. In this
section, scholarly findings and insights related to the research question will be presented to
develop a deeper understanding of the dynamics related to funding behavior and reward
structures. First, a motivational model for charitable giving will be presented. Second, the
novelty and idiosyncratic features of reward-based crowdfunding with a focus on backers
behavior will be discussed. Finally, theory on motivation and rewards will be presented.
2.1 Charitable giving
In reward-based crowdfunding, project backers receive a reward in return for their
contribution made to a project. In some cases these rewards consist of a limited or special
edition of the product crowdfounders intend to create. However, for this study the focus is on
platforms that offer non-product related rewards to motivate project backers. Within the
context of this study, charitable giving is appropriate to gain insights in the motivation of
backers as the project backers receive rewards in return for their contribution of substantially
less economic value than the contribution made (Ordanini et al., 2011; Kuppuswamy &
Bayus, 2015). Agrawal et al. (2014) suggested that for the reward-based model of
crowdfunding, and especially for the reward-based crowdfunding of creative products,
motivations to contribute are more philanthropic than anything else. The concept of
charitable giving has been under academic scrutiny for decades and the extensive body of
research in this field covers numerous aspects of philanthropy. Bekkers and Wiepking (2011)
have conducted an exhaustive literature review on over 500 studies on charitable giving to
extract the core incentives for individuals to donate monetary assets to arts, charities and
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Figure 1. A framework on the motivation for charitable giving (Bekkers & Wiepking, 2011).
Based on the literature review, the authors have created a framework composed of the core
incentives for charitable behavior. The developed framework is displayed above and the
presented factors will be discussed in order to gain a better understanding of backer behavior
in reward-based crowdfunding. First, an important note on the framework is that the ordering
is at random and does not imply a hierarchical structure. In addition, Bekkers and Wiepking
(2011) denoted that the motivation to donate usually stems from the interplay of multiple
factors, not from a single factor. Moreover, in the body of literature on charitable giving a
numerous amount of moderators have been found, including gender, income, social status and
even the weather (Schlegelmilch et al., 1997).
The first presented factor, namely need, relates to the public awareness of the
necessity of a donation to the beneficiary. Optimally, a backer experiences an urgency of the
need which has been found to persuade individuals to donate (Bekkers & Wiepking, 2011).
The awareness of need and a sense of urgency is created through a campaign for which there
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This is the process of soliciting, which is the second factor. It has been found that a
meager share of donors donate autonomously and most individuals only donate if they’re
being solicited. Important in this is the way people are solicited, which is detrimental for their
engagement, donation size and continuation of their support (Green & Webb, 1997).
The third factor, costs versus benefits, relates to whether the benefits of donating make
up for the financial costs. Economically, a donor is always off worse by donating, not being
able to retrieve the financial value of a donation through the benefits. Moreover, besides the
financial cost of donating there is also the cost in time and effort for information searches on
the beneficiary and the actual donating. A generally accepted belief is that material benefits
offered in return for a donation aid in raising funds, however, there is no strong foundation
that rewards actually contribute to attracting more donors or larger donation sizes in
philanthropy (Bekkers & Wiepking, 2011). These benefits could play a substantially bigger
role in reward-based crowdfunding, which will be elaborated on later in this segment.
If the assessment of costs versus benefits is not a concern in the motivation of a donor,
altruism, the fourth factor in the model, seems to be the leading motivation. Purely altruistic
individuals will not be motivated by the gains obtainable through a charitable organization but
donate solely to solve aid an organization or the assist in solving a problem.
The fifth factor of the framework of motivations for charitable giving is reputation.
This refers to the approval and recognition individuals will experience from their social
environment because they gave charitably. The social environment has been found to be
fundamental to the motivation of charitable giving by Bekkers and Wiepking (2011) in the
way that people behave according to the standards of their social environment, refraining
from alienating actions and engaging in activities which strengthen their position in their
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of previous contributions in combination with the identification of those donors has a
significant positive influence on the donating behavior of the individual.
The psychological benefits, the sixth found factor, relates to the positive emotions and
self-evaluations experienced when giving to charitable causes. These are feeling; altruistic,
emphatic, socially responsible, agreeable, a warm glow effect and feeling influential and
involved in a project, organization or humanity (Harbaugh, 1998). All these positive emotions
are generally referred to as the joy of giving (Green & Webb, 1997). Charitable organizations
often distribute rewards related to these psychological benefits in order to motivate donors to
donate, and to donate higher amounts (Andreoni & Petrie, 2004). In that sense, philanthropy
can be regarded as a market for buying positive self-reflections.
The seventh factor is labelled values, and describes the match between the moral goals
an organization is trying to reach and the personal values of the individual. If there is a strong
match, people will be inclined to support a cause as people are able to personally relate to the
cause and with the organization. Related to these values, and to the factor reputation, is theory
on the existence of two types of goods . Firstly, there are positional goods which are obtained
in order to strengthen and signal a certain position in the social hemisphere. Secondly, identity
goods are acquired because the characteristics of the good strengthen the identity of an
individual, thus how an individual would like to see him-or herself and wants to be observed
by others (Peltoniemi, 2015). The perceived match between a charitable organization and the
individual is founded in the cognitive assessment whether the organization will help in one or
either of these two respects (Peltoniemi, 2015; Wiepking & Bekkers, 2011).
Finally, the eighth factor is labelled efficacy and relates to the extent to which a backer
perceives the contribution made to impact the totality of a project or organization. Displaying
the direct effect of a donation made to the donor has been found to significantly improve the
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While all these factors influence the decision to donate, there is one crucial factor
influencing this final decision, which is trust in the good use of the funds (Venable et al.,
2015). A donor needs to perceive a project or organization to be trustworthy in employing the
donations received or a donation will not be made. Transparency of the use of funds,
documented previous accomplishments, signs of readiness and cost-saving marketing
programs have been found to increase trust by donors in charitable organizations (Venable et
al., 2005). The importance of trust in the proper use of the received funding has also been
found to have a significant importance in crowdfunding. Hereby, Mollick (2014) assessed that
trust can be established through, among others, experience, reputation, signals of readiness
and signals of quality. Moreover, Kottasz (2004) found that 80% of his sample preferred
detailed information on how their money would be spend in order to donate to charity.
Additionally, Cholakova and Clarysse (2015) found trust to be a key non-financial factor for
crowdfunding success and Gerber et al (2012) found that distrust in the use of funds is a
strong deterrent for crowdfunding participation.
2.2 Reward-based crowdfunding
In the following part, findings on reward-based crowdfunding, the dynamics related to
the reward structure and incentives to participate are presented. For the reward-based model,
backers are attracted by rewards whose economic value generally do not match the personal
financial value of the contribution made by the backer (Ozdemir et al., 2010). In this model,
the rewards vary largely in their content from platform to platform and from project to
project. Typically, rewards are a pre-sale of a special or limited edition of the to-be-created
product, a meet&greet with the crowdfounders, being personally involved in the project and
being credited as having assisted in the development of the project (Mollick, 2014). This
model of crowdfunding allows to examine the effect of rewards and different reward
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Verma, 2014; Wiepking & Bekkers, 2011; Andreoni & Petrie, 2004). Moreover, scholarly
research on crowdfunding has established that the reward structure in crowdfunding can be
highly influential on the success of a campaign (Cholakova & Clarysse, 2015; Antonenko et
al., 2014; Mollick, 2014; Wiggins & Ellis, 2011), but they fail to indicate details on
components of the reward structure that influence success. It can be expected that some
components of the reward structure lead to a higher donation size and more backers, while
other components can have an opposite effect.
Reward-based crowdfunding platforms connect crowdfounders to their potential
backers, who finance their proposed projects (Agrawal et al., 2015; Ozdemir et al., 2010).
Success in crowdfunding campaigns has been studied ever since the emergence of
crowdfunding. Drivers for successful crowdfunding campaigns are the duration of the
campaign (Ordanini et al., 2011, Kuppuswamy & Bayus, 2015; Cordova et al., 2015) and
requesting a modest amount (Antonenko et al., 2014, Cordova et al., 2015), which relates to
the perceived efficacy a backer needs to experience (Bekkers & Wiepking, 2011). In addition,
the backers frequency has been found to be important to success (Cordova et al., 2015) as
more backers cause more backers to contribute (Zhang & Liu, 2012; Colombo et al., 2015),
Also, the timing of the backers is important, as early contributions to a campaign function
serve as a quality signal to subsequent backers (Colombo et al., 2015). The crowdfounders
themselves need to present quality signals in their campaign in order to attract more funding
(Mollick, 2014) and also possess a large social capital which they are able to activate for their
campaign (Colombo et al., 2015; Mollick, 2014; Cordova et al., 2015). Finally, the rewards
offered and the reward structure have been found to be influential on the success of a
crowdfunding campaign (Antonenko et al., 2014; Cholakova & Clarysse, 2015; Wiggins &
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Following the literature on crowdfunding, these findings indicate that the
crowdfounders have a strong impact on the success of the proposed project with the
construction of their campaign. Motivations for the crowdfounders to engage in crowdfunding
mostly relate to the possibility to attract funding for their project from a large pool of backers
rather than being dependent on a profitability analysis of a single financier (Antonenko et al.,
2014; Cordova et al., 2015; Belleflamme et al., 2014). Moreover, crowdfounders’ desire to
reach this large pool of backers because they offer a large, and free, variety of insights on the
proposed project and the backers can aid in the development of the project, which is called the “wisdom of the crowd”. Since crowdfunding platforms are essentially on the internet, the
transparency and wide availability of crowdfunding platforms for individuals also generates
free publicity and project awareness, which motivates crowdfounders as well (Cordova et al.,
2015; Schwienbacher & Larralde, 2010). However, in the end crowdfounders mostly desire to
attract funding for their project from individuals visiting crowdfunding platforms
(Belleflamme et al., 2014).
The limited body of research on reward-based crowdfunding has produced different
insights whether backers are reward-driven or driven by more intrinsic factors. This
dichotomy relates to whether backers are driven by the instrumental output of funding a
project or driven by the activity itself (Wiggins & Ellis, 2011; Ryan & Deci, 1985). Findings
in the literature indicate that the benefits of self-expression, enjoyment, the presence of a
tangible outcome, personal utility and rewards are factors motivating people to back a project
on crowdfunding platforms (Cordova et al., 2015; Kuppuswamy & Bayus, 2015; Mollick,
2014; Belleflamme et al, 2014). Furthermore, Gerber et al. (2012) found the following
motivations; original rewards, helping others, supporting a cause and being part of a
community to be the main incentives for contributing to a crowdfunding project. From these
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by the activity itself as by the outcome it produces. Although the presented backer incentives
indicate that people are already motivated by factors such as enjoyment of the activity and
helping out, in reward-based crowdfunding the emphasis, as the name suggests, lies on the
rewards. These rewards have also been found to impact the backer decision to contribute, but
there has not been assessed what the effect of specific rewards is and how these rewards can
be strategically implemented (Ozdemir et al., 2010). The effect of rewards and their
structuring differ per project, based on the motivation of backers to give, which can be
intrinsic or extrinsic (Wiggins & Ellis, 2011; Ryan & Deci, 2000). However, a triggering
reward structure has been found to be a significant factor in project success (Cholakova &
Clarysse, 2015, Antonenko et al., 2014, Wiggins & Ellis 2011).
2.3 Motivation
To examine the effect of rewards and a reward structure, it is important to understand the
scholarly foundation of motivation, as rewards elicit a motivational response (Ryan & Deci,
1985). Motivation is defined as the psychological push an individual needs to perform a task
and to study motivation, self-determination theory, henceforth SDT, can be employed (Ryan
& Deci, 1985; 2000; Cerasoli & Nicklin, 2014). According to SDT, motivation is divided into
two main types, intrinsic and extrinsic motivation. Extrinsic motivation refers to an individual
being motivated to execute a task because of the ability to obtain external benefits through the
task (Ryan & Deci, 1985; 2000), meaning the task itself is just a means to achieve a goal. This
type of motivation contrasts intrinsic motivation in which individuals are motivated to execute
a task because of the nature of the task itself (Ryan & Deci, 1985, 2000; Deci et al., 2001). It
has been found by Ryan and Deci (1985, 2000) that intrinsic motivation stems from the
enjoyment one experiences when performing a task and the psychological needs that are
satisfied by performing the task. The abovementioned motivational factors for crowdfunding
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Backers who are looking for rewards or a tangible return for their contribution are
more motivated by extrinsic factors, while backers that are motivated to contribute to
crowdfunding projects either to help others, to be part of a community or to support a cause
are more intrinsically motivated. Motivating factors in philanthropy mostly relate to intrinsic
motivation as it has been established that benefits in philanthropy are minor, if present (Green
& Webb, 1997; Andreoni & Petrie, 2004). Intrinsic motivation stems from psychological
needs that humans inherently want to satisfy and are composed of three elements;
competence, autonomy and relatedness. Competence refers to the perceived test of individual
abilities when performing a task. Autonomy describes the absence of perceived external
pressure to perform a task. Relatedness refers to whether performing a task is personally
relevant to the individual and is valued by their social environment. If all three psychological
needs are supported, an individual will be intrinsically motivated to perform a task and will
enjoy performing this task. If one or more of three psychological needs are not satisfied,
extrinsic stimuli need to be employed to enhance motivation (Ryan & Deci, 1985; 2000; Deci
et al., 2001).
To further elaborate on motivation and rewards, Maslow’s hierarchy of human needs
pyramid can be employed (Sadri & Bowen, 2011; Deci et al., 1989). The widely accepted
pyramid of human needs, created by Maslow (1943), is composed of five main levels, which
refer to the hierarchical order of physical and psychological needs humans need to fulfill in
order to reap satisfaction and happiness in life (Maslow, 1943). The five basic human needs
addressed by the pyramid are attributed to be foundational to human activity and is highly
related to the concept of motivation (Sadri & Bowen, 2011; Taormina & Gao, 2013). The first
need is physiological and refers to the basic needs of human for survival, such as breathing,
food, sleep and sex (Maslow, 1943). The second need is safety, which is comprised of
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related to family, friendship and sexual intimacy. The fourth basic human need, esteem, refers
to factors such as having confidence, a sense of achievement, and being respected by others
and experiencing this respect. This level of human need can be related to being part of a
community (Gerber et al., 2012), which has been found to be a found main motivation of
backers to support crowdfunding projects. By engaging in a project, an online community of
backers is formed who approve and respect their fellow backer (Agrawal et al. 2015). The
fifth element of the pyramid, self-actualization, is related to the need to become the best self a
person is capable of being through morality, creativity, problem solving and spontaneity
(Maslow, 1943; Sadri & Bowen, 2011). Helping others, supporting a cause (Gerber et al.,
2012) and being actively involved in the creation of a creative product (Ordanini et al., 2011)
have been found to motivate backers to support a project. These findings can be related to the
components of the self-actualization need and crowdfunding seemingly offers a tool to partly
help in the fulfillment of these needs. Studies on organizational structures and motivation
have suggested the use of the pyramid of needs to look for efficient motivational structures to
motivate employees (Taormina & Gao, 2013; Sadri & Bowen, 2011; Hall & Nougaim, 1968)
and the pyramid can be a tool to examine to motivation to crowdfund, and the effect of
rewards and larger need these rewards relate to.
When observing the pyramid, the levels seem mostly related to intrinsic motivation as
the fulfillment of these needs seem related to performing activities. However, a
thought-through construction of rewards can also fulfill the needs and motivate people to engage in an
activity. For instance, rewards can be constructed in such a manner that they enhance esteem
through distributing prestige for supporting a cause (Ariely et al., 2009). In this case it is
important to consider whether it was the task that motivated the individual, or the reward
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SDT also describes the above described interplay between intrinsic and extrinsic
motivation. This interplay normally encompasses one direction, namely a decreasing intrinsic
motivation due to extrinsic motivational stimuli. Intrinsic motivational impulses are
considered to be more beneficial for an individual as it stimulates explorative behavior and
increases the skillset of an individual, however, the presence of extrinsic rewards decreases an individuals’ intrinsic motivation (Ryan & Deci, 2000; Cholakova & Clarysse, 2015). This
effect is called the crowding out effect and usually occurs when rewards are accompanied
with a task for which an individual was intrinsically motivated. These rewards will cause the
individuals to attribute their motivation to extrinsic factors and the perceived intrinsic
motivation diminishes, which will decrease the enjoyment experienced from performing the
task and the chances of this individual repeating the task plummets. Only if similar or higher
rewards are offered in the sequential task will the individual engage in the activity again
(Wiggins & Ellis, 2011; Deci et al., 2001; Kottasz, 2004).
2.4 Rewards
There have been contradictory findings in the research on crowdfunding and the effect
of rewards and the reward system in crowdfunding. Mollick (2014) stated that the
determinants for participation are mostly based on the rewards obtainable through support,
while Agrawal et al (2015) suggested that support was mostly based on philanthropy. This
latter suggestion has been supported by findings of Ordanini et al (2011) who found that most consumer’s participate to assist in the production of desired product. In turn this has been
contradicted by the findings of Cholakova and Clarysse (2015) who state that any form of
participation is focused on a tangible return, either monetary or in the form of rewards.
Nonetheless, it has been established that rewards affect the choice of backers to support a
project and project success (Gerber et al., 2012; Mollick, 2014; Cholakova & Clarysse, 2015;
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In general, rewards are related to extrinsic motivation as rewards set a goal for
performing a task which leads to the ignorance of the value of the task itself (Ryan & Deci,
1985). However, Guzzo (1979) posited that most rewarded cannot be boxed in to generating
either intrinsic or extrinsic motivation, but appeal to both types of motivation. Sharma and
Verma (2014) found that intrinsic motivation can be preserved even with the availability of
rewards if the reward equals the perceived effort needed to obtain this reward. This effort can
be related to monetary assets, search efforts and time consuming activities. Wiggins and Ellis
(2011) found no empirical support to suggest that either intrinsic or extrinsic motivations aid
in attracting higher levels of funding. This suggests that extrinsically motivated backers can
be similarly helpful as intrinsically motivated backers. Moreover, it contradicts the popular
believe that intrinsically motivated individuals give higher amounts of donations.
In essence, rewards are employed to elicit a desired behavioral response from the
individuals targeted by the rewards, like engagement, performance of a task or consumption
(Peter & Nord, 1980). To better understand how rewards affect behavior, the law of effect can
be employed (Sharma & Verma, 2014). This theoretical law states that behavior that is
rewarded is likely to be repeated while behavior that results in a negative effect is likely to be
refrained from (Sharma & Verma, 2014). Based on the law of effect, the behavioral
modification perspective was created (Peter & Nord, 1980), which focuses on environmental
factors that have the ability to influence human behavior. This is called operant conditioning,
which is the altering of individual behavior by installing consequences for desired or
undesired behavior (Peter & Nord, 1980). In the case of rewards, desired behavior is
promoted through offering rewards when enacting that specific behavior. This is known as
positive reinforcement and has been found to strongly influence individual behavior (Peter &
Nord, 1980; 1982). Following this Sharma and Verma (2014) argued that in order to
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reinforcement is essential. Although the research on reward structures in terms of economic
success is limited, these psychological theories signal the underlying structure of the effect of
rewards (Sharma & Verma, 2014). While most of the theories relate to repetitive behavior,
their applicability does not seem to be limited to repetitive behavior as the installment of
rewards does alter human behavior, only if the rewards are desirable.
Rewards can be classified as being either tangible or intangible (Sharma & Verma,
2014). Tangible rewards are associated with materialistic benefits on which an economic
value can be placed while intangible rewards relate more to psychological benefits such as
community-belonging, reputational benefits and the warm glow of helping (Harbaugh, 1998).
Clark and Wilson (1961) further developed this dichotomy and established three broad
incentives categories based on the underlying personal value that can be attached to the
incentive. They distinguish between; material benefits, which are benefits that can clearly be
put a monetary value on, solidary benefits, which are intangible rewards related to a positive
social benefit, and purposive benefits, which are intangible rewards relatable to the cause of
the beneficiary distributing the rewards. In charitable giving, rewards are postulated to
motivate individuals to donate to a cause. Logically, the receivable reward needs to be of a
substantially lower value than the donation in order to be beneficial to the cause. This implies
that most rewards are either solidary or purposive benefits, or material benefits of a relatively
low economic value compared to the contribution made.
Furthermore, Goal-gradient theory posits that people are motivated by rewards to the
extent that the rewards are perceived to be available (Sharma & Verma, 2014). If a reward is
perceived to be too distant, an individual will not be motivated to pursue this reward. On the
other hand, if a reward is too easily obtained, individuals will not be motivated to put effort
into trying to obtain another reward (Sharma & Verma, 2014). This findings implicate that in
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taken into account when setting a price level to that reward. Fine-tuning this construction can
significantly increase the effectiveness of a reward structure on the total amount of funding
raised (Cholakova and Clarysse; Antonenko et al., 2015).
3. Hypothesis development
Due to the novelty and unique characteristics of the crowdfunding phenomenon, it presents
itself as a highly interesting setting for testing hypotheses. One of these novelties is the
consistent presence of a reward structure to raise funds. In the following section, in order to
scrutinize the rewards structure, the developed hypotheses will be presented. The first two
hypotheses are related to the structure of the reward system, the second two hypotheses are
related to the content of the rewards in the reward structure. This section is finished with
figure 2, which presents the theoretical model proposed by this study.
3.1 Reward categories
A reward structure is constructed in such a manner that it motivates backers to give higher
donations based on the desirability of the rewards offered. Andreoni and Petrie (2004) found
that the categorization of rewards has the power to significantly affect contribution size and a
thought-through construction of this categorization can play a key role in the success of a
campaign requesting funding. The decisive nature of a relevant reward structure has been
confirmed by Cholakova and Clarysse (2015) who state that an attractive reward structure can
either make or break a campaign, a statement confirmed by Sharma and Verma (2014) who
did research contributing to theory on consumerism and found that a thoughtfully constructed
reward structure can lead to higher revenues, greater brand loyalty and a larger customer base.
However, the abovementioned scholars did not indicate which structural and content
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The number of reward categories has been found to have two contradictory effects on
people, which is called the paradox of choice (Scheibehenne et al., 2010). Firstly, it has been
argued that an increase in the number of categories increases the post-consumption
satisfaction of individuals as it increases the experienced self-determination (Mogilner et al.,
2008). An important component of self-determination is the perceived control over a situation and there’s ambiguity whether an increase in the number of reward categories increases the
sense of autonomy or increases the perceived sense of external control, which both have an
opposite effect on intrinsic motivation (Ryan & Deci, 1985; 2000; Wiltermuth & Gino, 2013).
Second, the paradox of choice states that in increase in options also leads to a decrease in
willingness to act upon a choice as the perceived cognitive effort increases (Scheibehenne et
al., 2010).
In addition, it has been found by Mogilner et al. (2008) that an increase in the number
of product options leads to less pre-consumption satisfaction and decreases a consumers’
willingness to spend as the consumer is faced with a choice overload. A choice overload
refers to an overabundance of options which in turn decreases the motivation to choose, a
decrease in preference for any of the options and an increase in disappointment and regret
(Scheibehenne et al., 2010). Since people will only donate once and choose one category on a
crowdfunding platform, the anticipated regret increases with the number of choices. The
anticipated regret is one of the leading factors in choice overload and refers to the regret an
individual expects pre-consumption because of the options not obtainable. An increase in
categories will increase the anticipated regret, which will in turn decrease the motivation for
an individual to obtain any option (Langner & Krengel, 2013). Moreover, the costs versus
benefits analysis donors in charitable giving internally conduct (Bekkers & Wiepking, 2011)
will observe that an increase in the number of categories will raise the observed costs,
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equally. Finally, an increase in reward categories increases the time and therefore perceived
effort needed for a decision. In charitable giving literature it has been found that an increase in
the effort people must exert to donate, their donation size decreases and their motivate to
engage in donating at all decreases (Green & Webb, 1997). Based on an increase in choice
overload, an increase in anticipated regret and a less advantageous cost/benefit balance for the
project backer, it is hypothesized that;
H1: The number of reward categories is negatively related to the individual donation size
When presented with categories, people have the tendency to exert the least amount of effort
to be in a desired category (Andreoni & Petrie, 2004). This means that when presented with a monetary category with a range of €25,- up to €50,-, most individuals will give €25,-.
Increasing the monetary accessibility of a reward can therefore positively affect the donations
size made to a project.
Additionally, it has been found that people also tend to avoid the lowest reward
category in a reward structure, generally choosing the second lowest category (Venable et al.,
2005; Andreoni & Petrie, 2004). By increasing the category sizes, people would donate more
based on this finding. Moreover, anchoring theory posits that people have a tendency to base
their decisions on an anchor, which is the first trusted source of information processed by the
individual (Ariely et al., 2006). Often, this anchor is derived from environmental factors and
the anchor can be highly arbitrary in its relevance and usefulness for further decisions (Ariely
et al., 2006). In the case of reward structures, the anchor can be set by the project itself. The
first visible accessibilities to rewards can be the price anchor for people on which they base
their further decision on what amount to donate to a project. By increasing the accessibility,
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could systematically donate higher amount based on the constructed price anchor. Based on
this, it is hypothesized that;
H2: The average reward accessibility is positively related to the individual donation size
3.2 Reward content
A popular belief in studies on charitable giving is that rewards and gifts in exchange for a
donation will increase the individual donation size and number of donors, however, as posited
by Bekkers and Wiepking (2011), there is no strong academic foundation for this belief.
Nonetheless, most models of philanthropy do incorporate some sort of reward system to
motivate donors, with rewards relating to minor material benefits or with rewards targeting
the social status like a “wall of fame” or being listed on the beneficiaries website (Mason,
2016). Giuduci et al. (2012) stated that, based on their study, individuals decide to fund to a
project with rewards but without monetary returns if the non-monetary reward consists of a
strong social and/or emotional component. Furthermore, Cholakova and Clarysse (2015)
stated that reward-based crowdfunding has been highly efficient in collecting funds from
individuals not motivated by financial returns, but by more subtle rewards. Information has
been collected on common rewards offered in the theory on crowdfunding (Gerber et al.,
2012; Belleflamme et al., 2014; Colombo et al., 2014) and in the empirical setting and two
consistently present rewards were extracted.
The first reward relates to social recognition and has been found to be a strong
motivator for donors in studies on charitable giving (Andreoni & Petrie, 2004; Mason,
2016:Vesterlund, 2003, Harbaugh, 1998; Reinstein & Riener, 2012). Social recognition refers
to the inherent human desire to be respected and to be positively evaluated by their social
environment (Ariely et al., 2009; Bekkers & Wiepking, 2011). In the context of charitable
22
observe this behavior, thus to be socially recognized. This is distributed by making a
contribution publically visible (Cholakova & Clarysse, 2015). Ariely et al. (2009) go one step
further in analyzing social recognition and argued that what they refer to as image motivation
is an additional type of motivation besides extrinsic and intrinsic motivation.
Social recognition is known to increase the number of donors (Andreoni & Petrie,
2004) by allowing backers to communicate their generosity to their social environment.
Moreover, publicizing the name and the amount donated has been found to increase donation
size (Vesterlund, 2003) and Harbaugh (1998) added to this understanding by establishing that
distributing social recognition can increase the total donation level to a cause. Finally, Ariely
et al. (2009) established that social recognition has a significant effect on the intention to
contribute. All these studies were based on empirical settings that made contributions
publically visible compared in relation to not making the contribution publically visible, thus
focused on the singular effect of social recognition on donor behavior. However, the
discussed studies largely ignore the effect of social recognition when it is incorporated in a
reward structure. A reward structure is substantially different from the studied singular effect
of social recognition since there are also different rewards available and the monetary
accessibility, thus the monetary amount required to obtain this reward, of social recognition
can vary in a reward structure. Based on this and to test social recognition in this context, it is
hypothesized that;
H3: The monetary accessibility of a reward related to social recognition is positively related to the individual donation size
The second reward relates to high project involvement. This reward entails direct
communication with project founders, direct involvement in a project or product development
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al., 2011; Colombo et al., 2014). Gerber et al. (2012) found that in crowdfunding, a reward in
general has to be related to the project in order to appeal to the audience because project
backers only contribute to projects they feel affiliated to.
In the context of charitable giving to art beneficiaries, it was found that the option to
be personally involved in the creation of a product is a key driver for funding (Sargeant et al.,
2002). This relates to the suggestion of Ordanini et al. (2011), who established that most
backers fund a project because they can personally identify with the project and want to see
the project come into existence. Self-identification with the project has also been found to be
a key motivator for charitable giving (Bekkers & Wiepking 2011; Kottasz, 2004; Natter &
Kaufman, 2015). Additionally, personal contact with project initiators has been found to boost
donating behavior (Harbaugh, 1998). Especially for creative projects, high project
involvement has been argued to be a strong factor for contribution decisions. This is based on
the fact that identification with a project strongly increases with creative projects as the project can serve as an expression of someone’s identity (Ordanini et al., 2011). Based on
these findings, it is hypothesized that;
H4: The monetary accessibility of a reward related to high project involvement is positively related to the individual donation size
Reward structure
H1 (-)
H2 (+)
H3 (+)
H4 (+)
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4. Research design and methodology
4.1 Empirical setting
For this study, the empirical setting is the non-profit organization Cinecrowd, a Dutch,
reward-based crowdfunding platform for movie projects. Founded in 2011, Cinecrowd has
experienced a rapid growth succeeding expectations. The founders of Cinecrowd hoped to
fund 5 projects in their first year, which became 16 successful projects. This unforeseen
growth continued and in 2015 Cinecrowd successfully financed 114 movie projects.
Cinecrowd reported a staggering 83% success rate in 2015. The visitors of the website know
exactly what type of projects to expect on the website and share a passion for movies, making
it an easier crowd to convince to invest and engage in a project. This explanation is in line
with the findings of Ordanini et al, (2011) and Agrawal et al. (2014) who found that for
creative crowdfunding platforms people tend to be more inclined to support and advocate
creative projects due to the specificity of the platform and a strong sense of identification.
Since Cinecrowd commenced operations, 401 projects have been posted on the platform with a success rate of 83%. Cinecrowd has employed a standard “all or nothing”
model, in which projects only receive the funding if they have received >100% of their
funding target. If unsuccessful, the funding will be returned to its sources. When successful,
10% of the total received funding goes to Cinecrowd as a fee for using their platform and for
the guidance Cinecrowd offers during the campaign. This guidance entails expertise on
crowdfunding dynamics, the experience of Cinecrowd with efficient crowdfunding campaigns
and an optimal fundraising strategy. In exchange for their funding, backers receive rewards
related to specified rewards categories based on donation size. The rewards and the reward
categories are completely up to the crowdfounder, although Cinecrowd does provide advice
on an optimal structure. Nonetheless, there is a large variance among different projects in the
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most crowdfunding websites, the introduction and advertising of the project is done through a
self-made introduction video posted on a unique, project-specific page on the Cinecrowd
website. On this page, all information on that project, its reward structure, the cast and crew
of the project and the number of comments, Facebook likes and updates of the project can be
found. Also, the number of backers and the percentage of the funding target reached are
clearly visible upon opening the project-specific page.
4.2 Data collection
The sample for this quantitative study is composed of projects which finished their campaign
between the period January 1, 2015 till May 5, 2016. During this period, 167 project
campaigns were initiated on Cinecrowd. All proposed projects on the platform are movie
projects, a given which can decrease the representativeness of this study to other
crowdfunding platforms and which will be taken into account when discussing the results.
From the 167 projects, 12 were not included in the sample either because they were
irretrievable from the website or they were prematurely cancelled by the crowdfounders.
The data was collected manually from the webpage of Cinecrowd. Cinecrowd
provided a list of all proposed projects in this period and their achieved funding, year of the
campaign and movie-specific genre. Due to the informal website design, the rest of the data
had to be collected manually. This was done with the list of project campaigns provided and
through the search engine available on the Cinecrowd website itself. All projects posted on
Cinecrowd from the start of its operations can be found using this search engine.
4.3 Measures
Dependent variable
Average donation size. This study analyzes the effect of reward structure components
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project level. The dependent variable is the average donation size to each project. This
dependent variable was chosen to observe whether specific reward structure components
affect the reaction of backers to the project in terms of money, thus significantly increase or
decrease the individual donation size to a project. This dependent variable, average project
donation size, is operationalized by dividing the total amount of funding received by a project
by the total number of backers to that project.
Independent variables
Number of reward categories. This variable is quite straightforward and was
operationalized by adding all the different reward categories a project proposed. Every single
project on Cinecrowd has reward categories and the observed minimal number of reward
categories was 5. The number of reward categories captures the amount of effort that is
needed to observe a complete reward structure and the number of options in terms of rewards
and in term of donation sizes in a reward structure.
Average accessibility of the first five rewards. For this variable, the monetary size
needed to receive the first five rewards was added up and divided by five. This value
represent the initial anchor of a reward structure and is a first signal to the backer what kind of
donation size the crowdfounders are suggesting. Only the first five rewards of a reward
structure was taken for two reasons; first, the lowest number of reward categories in our
sample was five, second, for most projects the variance in reward category size increased
greatly and reduced comparability.
Hypotheses 3 and 4 relate to the accessibility of the rewards related to social
recognition and high project involvement. In order to be able to analyze the effect of the two
proposed rewards, social recognition and high project involvement, data was collected on the
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needed to obtain the specified rewards. Every project is allowed to create its own reward
structure and monetary accessibilities of the rewards. Due to a high variance in the
accessibility of the two rewards, the accessibility to these rewards was categorized. If a
reward was not present, the variable relating to that reward was given the value 0. If the reward was obtainable by donating an amount between €1,- and €40,-, the accessibility to that
reward was in category 1. For an accessibility between €41,- and €80,- this was category 2. Between €81,- €120,- this was category 3. Between €121,- and €160,- this was category 4 and
for an accessibility exceeding €160,- this reward was placed in category 5. To continue,
category 1-5 were made into five separate dummy variables in order to be able to test their
effect on the average donation size. Thus if a project offered social recognition in return for a donation of €100,-, the dummy variable for category 3 would take on a value of 1 and the
other four dummy variables were valued 0. This method of measurement was applied to both
independent variables accessibility of social recognition and accessibility of high project
involvement.
Accessibility to the reward related to social recognition. Social recognition is
described as the process in which the name of the backer is announced publicly, which is a
solidary benefit (Clark & Wilson, 1961). In Cinecrowd projects, social recognition is
distributed done in several ways, namely, by putting your name on the website of the project,
on the Facebook page of the project or in the final credits of the project. For this study, the
latter type of social recognition is categorized for the analysis, thus your name in the final
credits of the project, which follows the way in which Colombo et al. (2015) studied the effect in what they referred to as “ego boosting” rewards. This means that when a reward is offered
in the reward structure that will mention your name in the final credits of their project, the
reward will be counted based on its monetary accessibility. The monetary accessibility of this
28 Accessibility to the reward related to high project involvement. This reward relates to
a certain degree of personal involvement in the project a backer can receive in return for a
pre-set donation size, which is a purposive benefit (Clark & Wilson, 1961). It is
operationalized using literature on charitable giving and by examining the Cinecrowd
webpage and has been established as direct, personal and physical involvement in the project.
This can be done through a meet&greet with the directors/crew of the project, playing as an
extra in the project or receiving a tour on the live set of a project. This means that when a
reward is offered in the reward structure that will allow you to be highly involved in the
project, the reward will be counted based on its monetary accessibility. The monetary
accessibility of this reward will be categorized into dummy variables as discussed in the
previous paragraph.
Control variables
Target funding. This variable refers to the total amount of funding the crowdfounders
post on the webpage and hope to receive. Following Colombo et al. (2014) and Cordova et al.
(2015), the target funding serves as a control variable in the regression model as it is expected
to strongly influence the project characteristics. The target funding is directly observable on
the webpage for the project, where the crowdfounders post the amount of funding they aspire
to receive for their project.
Fund support. This control variable is a dummy variable. It is measured by whether
the project shows the support of a film or art fund on their project webpage or not. Thus this
variable refers to the visible support of a fund. Fund support is a strong sign of both project
legitimacy as it as a sign of quality, factors which have been found to significantly contribute
to project success if present (Mollick, 2014; Cordova et al., 2015; Ordanini et al., 2011). This
29
does not incorporate if there was actually funding given to the project via crowdfunding,
information which is not available.
Discrete backers. This control variables controls for the number of people in a
crowdfunding project who decided to fund a project without receiving any form of return for
their donation. Based on the findings of Wiggins and Ellis (2011), it is expected that
intrinsically motivated backers do not donate substantially less or more than backers who do
choose rewards. As the reward structure is explored, the backers not choosing rewards need to
be controlled for.
Genre. This variable refers to the genres projects can be grouped into. The genres are
predetermined by Cinecrowd and these categories are; video clip, experimental, short movie,
documentary, animation and feature movie. Based on a preliminary analysis of the data, only
4.51% of the sample did not fall in to the category documentary, feature movie or short
movie. Therefore, a fourth group was made and labelled artistic. This category contains all the
remaining genres, thus animation, experimental and video clip.
4.4 Analytical approach
For the analysis, a hierarchical multiple regression analysis was employed for the first two
models. Hierarchical regression analysis can be used to check the effect of variables under
different conditions and allows for a comparison between different models (Field, 2009; Stam
& Elfring, 2008). SPSS was used for a statistical analyses. The first two models were created
to test the first two hypotheses, the number of reward categories and the average accessibility
of the first five reward categories. For models 3 and 4, multiple regression analysis was
employed to test for H3 and H4 separately and individually, including only the control
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Furthermore, the dependent variable, average donation size, was initially found to be
non-normally distributed (Shapiro-Wilk = .000, p < 0.01). Because of this, a logarithmic
transformation was conducted (Field, 2009) on the data and after the transformation the data
was normally distributed (Shapiro-Wilk = .281, p > 0.05). Following this, the other monetary
variables, which were the average accessibility of the first five rewards and the target funding
were also logarithmically transformed in order to make them analyzable in relation to the
dependent variable (Field, 2009).
In addition, there was first visually checked whether all the variables had a linear relationship
to the dependent variable and that there were no heteroscedasticity problems with the
variables. Both the assumption were met by the models. Also, there was tested for
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5. Results
In the following section, the results of this study are presented. In the first part, the descriptive
statistics of the sample are displayed and explained. In the second part, the correlations of the
variables included in the models are presented and discussed. To continue, the results of the
regression analyses are displayed and elaborated on.
5.1 Descriptive statistics
In table 1 the descriptive statistics of the sample are presented. The numbers indicate
the descriptive statistics before any transformation or categorization to be able to accurately describe the sample. On average, the 155 observed projects received €91,51 per backer and
their target funding averaged at €6565,61. The average funding received by the projects was
€6467,46. This number is lower than the target funding because 89% of the project were
successful in obtaining their targeted funding. The 11% that did not receive their targeted
funding did not reach their target by large margins, which explains the lower total received
funding in relation to the total targeted funding. These findings are in line with Mollick
(2014) who asserted that projects either succeeded by narrow margins or failed by large ones.
Once the threshold of the targeted funding, 100%, was reached, overfunding did not occur
excessively for most of the projects, they received 110.88%, while unsuccessful project on
average received 21.32% of their target funding. The projects were supported by, on average,
75 people of which 29% decided to back a project without receiving any form of reward for
their contribution. For the projects, to gain a reward related to social recognition you had to contribute €275,34 on average and for a reward related to high project involvement this was
€451,77. The number of reward categories for the projects averaged at 8 and the average
accessibility of the first 5 rewards categories €69,57. Of the 155 projects, 25,81% were
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Table 1. Descriptives N=155
Average donation size €91,51
Number of reward categories 8.39 Average reward accessibility €69,57 Accessibility to social recognition €275,34 Accessibility to high project involvement €451,77
Average target funding €6565,61
Fund support 25,81% Genre Documentary 47,10% Genre Short 41,93% Genre Feature 6,45% Genre Artistic 4,51% Discrete Backers 21.63
Overall Project success rate
Successful project funding received Unsuccessful project funding received Average funding rate
89% 110.88% 21.32% 101,06% Average number of project backers 75.12 % of discrete backers of total backers 29% Average total project funding received €6467.46
Social recognition accessibility High project involvement accessibility Not present 5% Not present 30.3%
€1 tm €40 27% €1 tm €40 0% €41 tm €80 25% €41 tm €80 4.5% €81 tm €120 13% €81 tm €120 9.7% €121 tm €160 4% €121 tm €160 2.6% >€160 26% >€160 52.9%
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5.2 Correlations
In table 2, the correlation matrix is presented which displays the means, standard deviations
and correlations of the variables included in the regression analyses. The averages presented
in the correlation matrix differ from the descriptive statistics means because several
transformation techniques were applied to the variables. All the monetary variables were
transformed using a logarithmic function, which were variable number 1, 3 and 6.
Furthermore, variable 4 and 5 were transformed into categories ranging from 0-5. In the
regression, these categories are individual binary variables created to be able to interpret the
findings. However, in the correlations table one variable was used for both social recognition
and high project involvement because this variable does allow to examine correlations. Not all
significant correlation are mentioned in the following section, only those contributing to the
discussion.
First, in table 2 we can see significant correlations relating to the average donation
size. The first significant positive correlation is with the variable average reward accessibility
(r =.401, p < .01). The second significant positive correlation with the dependent variable is
with the independent variable target funding (r = .536, p < .01) which indicates a high positive
relation. The third significant positive correlation with the dependent variable is with the
variable fund support (r = .293, p < .01) indicating a tendency to positive relation. Moreover,
these three independent variables also show some significant correlations with each other. The
average reward size is significantly correlated with target funding (r =.206, p < .05) but not
with fund support. Moreover, fund support is significantly correlated with target funding (r
=.396, p < .01).
There are two variables that show significant correlations with multiple variables.
Besides the abovementioned significant correlations, the control variable target funding is
