Saying enough vs saying too much: Lessons on optimizing project risk description for crowdfunding success in developing countries

Abstract

Online crowdfunded technology projects offer opportunities for driving sustainable growth in developed and developing countries. However, entrepreneurs propose these projects within a context of information asymmetry and risk uncertainty which prospective backers must grapple with. Although Kickstarter has been requiring technology entrepreneurs to disclose project risk information since 2012, the value of this disclosure remains underexplored amidst controversies in the literature about whether project risk description enhances crowdfunding success. In addressing these issues, this research employs signaling theory and curvilinear analysis to examine what project risk description length and sentiment levels maximize crowdfunding success for technology projects, particularly those in developing countries. Statistical analyses of 1059 campaigns on Kickstarter partly support and challenge this study's theorizations. Risk description sentiment and length have U-shaped and inverted U-shaped effects on crowdfunding success respectively. Although these effects do not differ across projects in developed and developing countries, detailed risk descriptions generally yield better results for projects in developing countries. These insights advance and clarify the underdeveloped literature on the link between project risk description and crowdfunding outcomes and offer guidance on how developing country entrepreneurs can couch project risk statements to optimize crowdfunding success.