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NTU Management Review Vol. 32 No. 2 Aug. 2022

ambiguous environment (Kuppuswamy and Bayus, 2018). As such, the focal investor
might look for cues from other bystanders about how to act in this ambiguous situation.
When the focal investor notices that other bystanders still have a “wait-and-see” attitude,
the focal investor is more inclined to mimic the non-helping behavior of others. In other

words, the presence of bystanders will undermine investors’ willingness to contribute to a
crowdfunding project.
Second, investors might be less inclined to invest in a project with a higher bystander

ratio since investors are risk-averse. Prior studies show that rewards play a significant
role in explaining the funding decisions on crowdfunding platforms (Bruton et al., 2015;
Mollick, 2014). A higher bystander ratio implies that fewer people are willing to provide
funding, which leads to a higher risk of project failure. One of the main objectives of
crowdfunding investors is seeking the first use of the novel product. If the project has a

higher risk of failure, it will discourage investors from investing. As a result, investors
tend to withhold their funding in the presence of bystanders. Based on the bystander effect
and the risk aversion effect, in defining the bystander ratio as the number of bystanders

divided by the number of supporters, we suggest a negative association between the by-
stander ratio and the daily aggregate amount of capital received.
Hypothesis 1: The bystander ratio of a project is negatively associated with the
project pledge amount.

2.2 Interplay of Bystander Effect and Project Legitimacy
If the bystander effect prevents investors from investing in crowdfunding projects,
the question of interest would be: How can project creators alleviate such effects? From

the social psychological perspective, when the project creator provides more information
to bystanders, they are more inclined to provide help (Darley and Latané, 1968). That
is, bystanders are more likely to intervene in less ambiguous situations than in more
ambiguous situations. Thus, how to reduce ambiguity with more information represents a
potential mechanism to convert bystanders to backers.

The crowdfunding platform presents significant information asymmetries between
project creators and crowd funders (Colombo, Franzoni, and Rossi-Lamastra, 2015; Mol-
lick, 2014). For crowd funders, they face two main information challenges. First, these

crowdfunding projects take place on the platform in a relatively short period, and it is dif-

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