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

cycle, bystanders receive the notification letters from the platform after clicking the “Like”
button. These letters provide updated project-related information, including the percentage
of projects funded, number of supporters for the project, and funding requests. In this
respect, these bystanders are still kept informed of the progress of the project. It remains

interesting to explore how the presence of those bystanders on the crowdfunding platform
impacts project fundraising performance.
We first describe the characteristics of investors on the reward-based crowdfunding

platforms and examine how investors might respond to the presence of bystanders. Crowd
investors are mostly small investors who lack investment expertise, skills, and experiences
(Fisher, Kuratko, Bloodgood, and Hornsby, 2017; Steigenberger and Wilhelm, 2018). Prior
crowdfunding studies thus find that crowd investors tend to base their investment decision
on the investing behavior of their peers (Kuppuswamy and Bayus, 2017). Regarding

the motivation for funding, researchers have established that some investors contribute
their funding in exchange for tangible products, services, or rewards, often thought as a
purchasing behavior (Mollick, 2014). Other investors are motivated to provide funding

due to feelings of sympathy or empathy toward the funding objective (Agrawal, Catalini,
and Goldfarb, 2014). For this reason, these investors tend to fund projects that support
social initiatives consistent with their identity or beliefs. While investing behavior on
crowdfunding platforms can be viewed as either purchasing or philanthropic behavior,
investors derive their benefits only if the project they support reaches the funding target.

Notably, the success of the crowdfunding project depends not only on the funding by the
focal investor but also on contributions from other investors. In this regard, investors are
aware of contributions by other investors and prefer to invest in campaigns with a higher

probability of success (Mollick, 2014).
Considering these investor characteristics, we examine how the presence of bystand-
ers will impact fundraising performance. We argue that the social influence mechanism in
the bystander effect literature and the investors’ risk aversion are crucial in our context.
First, prior studies find that most investors on the crowdfunding platform do not possess

investment-related expertise or skills (Fisher et al., 2017), so investors tend to base their
investment decisions on others’ investing behavior (Cecere, Le Guel, and Rochelandet,
2017; Chan et al., 2020; Kuppuswamy and Bayus, 2018). This tendency is particular-

ly pronounced on the crowdfunding platform since this platform is a highly noisy and

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