The Role of Signaling and Social Identity Effect on Crowdfunding Success: Evidence from Brics Countries

Abstract:

This study examines the effect of signaling and the social identity inherent in the project owner in determining the success of project funding in crowdfunding. The study is tested using 580 data from projects in Brazil, Russia, India, China, and South Africa (BRICS countries) during the period of 2012 to the beginning of 2019. Using ordinary least square (OLS) as analysis techniques, it is found that the signaling effect that is explained through comments and updates has a positive and significant influence in supporting funding success. Signaling is an ultimate way to eliminate asymmetric information in online transaction including in crowdfunding. Social identity effects on crowdfunding also show positive and significant results in influencing the success of funding explained through the number of project publications on Facebook. Project publications on Facebook is one of the examples of electronic word-of-mouth that has been proven to have significant impact in crowdfunding campaign. On the other hand, it is not proven that the social identity effect explained by the number of friends on Facebook has a significant influence on the success of crowdfunding in the BRICS countries. Number of Facebook friends is long associated with identity sentiment that result in higher funding during project campaign. However, this research shows no evidence due to some limitations surrounding the data.