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The More, the Merrier? The Bystander Effect on Crowdfunding Platforms

1. Introduction

Early-stage financing is important for new ventures to succeed (Gompers and Lerner,
2004). However, due to the high-risk nature (Hanley and Girma, 2006), lack of a track

record (Scholtens, 1999), limited cash flow (Hanley and Girma, 2006), and absence
of collateral, new ventures face more difficulties than established firms do to obtain
financial resources (Cassar, 2004), thus making capital shortage a common concern for
entrepreneurs. Conventionally, new ventures may access financial resources from different

sources, such as entrepreneurs’ families, friends, or angel inventors (Bruton, Khavul,
Siegel, and Wright, 2015). Recently, crowdfunding has become a novel channel to obtain
financial support for start-ups (Agrawal, Catalini, and Goldfarb, 2011).
Crowdfunding is “an open call, essentially through the Internet, for the provision of

financial resources either in the form of donation or in exchange for some form of reward
and/or voting rights to support initiatives for specific purposes” (Mollick, 2014). The
growing popularity of crowdfunding has attracted scholarly attention, and researchers
have sought to understand how this nascent fundraising platform differs from traditional

financial intermediaries. Scholars have identified a number of factors associated with
campaign fundraising performance, including the project’s fundraising duration, campaign
fundraising goal, project descriptions, and number of funders (Mollick, 2014).
Among these factors, the role of founders’ social networks in social media has been

examined by researchers increasingly (Bruton et al., 2015; Mollick, 2014). Specifical-
ly, social networks prompt people to visit the crowdfunding project initiator’s webpage,
thus increasing the project’s publicity and the possibility of being funded (Hong, Hu, and
Burtch, 2018; Kuppuswamy and Bayus, 2018; Mollick, 2014). However, the social psy-

chological literature suggests that a growing size of social networks might not lead to pos-
itive outcomes. That is, more people may cause non-helping behaviors when people are
aware of others being around; this is termed as the bystander effect (Darley and Latané,
1968; Fischer, Krueger, Greitemeyer, Vogrincic, Kastenmuller, Frey, Heene, Wicher, and

Kainbacher, 2011; Hussain, Shu, Tangirala, and Ekkirala, 2019). This implies that, in the
crowdfunding context, more supporters may negatively influence investors’ propensity to
fund a project.
While there are hints about the bystander effect on crowdfunding platforms,

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