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

2018; Mollick, 2014), we advance prior studies by looking at social networks at a more
granular level on this nascent platform. We highlight that one type of supporters—bystand-
ers—will undermine campaign fundraising performance based on the social psychological
literature. Our findings thus contribute to an emerging research stream on more nuanced

insight into the behavior of crowd investors (Chan et al., 2020). Moreover, we extend
recent studies that examine bystander effects in the crowdfunding context by exploring
the boundary conditions (Chan et al., 2020; Kuppuswamy and Bayus, 2017). We find that

project legitimacy and project funding duration would mitigate the adverse bystander ef-
fect. Overall, we contribute to a better understanding of funding dynamics on crowdfund-
ing platforms.
We discuss the research hypotheses in section 2. Section 3 describes the research
methodology, and section 4 presents our empirical results. Section 5 discusses the findings,

and the last section provides the conclusion for this study.

2. Theoretical Background and Hypothesis Development

2.1 Bystander Effects and Crowdfunding
The association between social ties and the success of start-up projects has been
widely documented in the literature (Hsieh and Fang, 2020; Shane and Cable, 2002; Sulli-
van and Ford, 2014). Particularly, prior studies suggest that family and friends are import-

ant sources of seed capital for start-ups (Agrawal et al., 2011). According to Parker (2009),
31% of start-ups’ capital comes from the founders’ family and friends. This is primarily
because relatives and friends have an information advantage over other potential inves-
tors, which allows them to overcome information asymmetry between project creators and

potential investors (Agrawal et al., 2011). In addition to family and friends, social media
platforms, such as Facebook and Twitter, represent an important source of social networks.
Crowdfunding creators might benefit from sharing their projects on such platforms (Kup-
puswamy and Bayus, 2018). Prior studies have demonstrated the significance of social

media in shaping crowdfunding campaign performance. For instance, Mollick (2014) finds
a positive association between the number of project initiators’ Facebook friends and the
success of crowdfunding fundraising. In a similar vein, Courtney, Dutta, and Li (2017)
document that the use of media and backer sentiments are important predictors for funding

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