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Investigating the Impact of Competition and Incentive Design on Performance of Crowdfunding Projects: A Case of Independent Movies

J. Theor. Appl. Electron. Commer. Res. 2021, 16(4), 791-810; https://doi.org/10.3390/jtaer16040045

by Li Chen

Reviewer 1: Anonymous

Reviewer 2: Anonymous

Reviewer 3: Anonymous

Reviewer 4: Anonymous

J. Theor. Appl. Electron. Commer. Res. 2021, 16(4), 791-810; https://doi.org/10.3390/jtaer16040045

Submission received: 28 October 2020 / Revised: 12 January 2021 / Accepted: 14 January 2021 / Published: 27 January 2021

Round 1

Reviewer 1 Report

The paper is well written with reasonable contribution to the literature. I have one suggestion about data analysis. Can you try to conduct a logistic regression by investigate the funding success or failure. That is, use the funding success or failure (to be defined) as dependant variable in a regression. I believe that this effort might enrich your findings.

Author Response

Thank you very much for all your comments, suggestion, and support. We also thank the Editor-in-Chief for giving us the opportunity to revise our paper. We feel confident that our responses below will address and satisfy comments from all the reviewers. The manuscript is revised accordingly (we use “Track change” in Microsoft Word to highlight the revision based on JTAER requirements). Our responses are indented under each of the major comment. The original comments are in bold font.

Reviewer 1

Thank you for your comments. We will address your concerns below and hopefully, you will find them satisfactory. Hope you will find that the current draft is suitable for publication in JTAER.

Thank you for your comment. Following your suggestion, we have conducted a logistic regression using the funding success or failure (whether the funding target is reached) as dependent variable. We use the same approach of the linear regression we have conducted. Based on Reviewer 4’s comment, we have added two dummy variables (D_Drama and D_Comedy) to control the theme of movies. D_Drama equals one if the theme of movie is drama and zero otherwise. D_Comedy equals one if the theme of movie is comedy and zero otherwise. Please see the table on the next page for the results.

We find that the coefficients of competition factors (number of competitors and competition intensity) have the same direction but are not significant. The coefficients of reward design factors (reward levels, contribution level of top reward and the dummy variable of attending movie festival) remain the same direction and significance level. In addition, female movie producers have significantly higher chance of reaching their funding targets.

We report the linear regression results using the percentage of target funding achieved as dependent variable for two reasons. First, we believe the percentage of funding raised provides more detailed information about crowdfunding outcome. Therefore, it is a better measure of crowdfunding performance. Many studies in our reference also use funding raised as dependent variable. Second, the crowdfunding platform (Seed and Spark) adopts Keep-It-All model, which means project founders can keep the money raised even if their funding targets are not reached. As a result, they will benefit from increase in percentage of target funding raised as well.

Hopefully, you will find our response satisfactory.

Table. Summary of logistic regression analysis (Standard errors in the parentheses) N = 209.

Model 1

Model 2

Model 3

Model 4

Intercept

0.582

(1.420)

2.468

(1.794)

0.209

(1.436)

1.983

(1.850)

No_Comp

-0.044

(0.081)

-0.038

(0.083)

-0.035

(0.083)

-0.027

(0.085)

Comp_Int

-0.288

(0.183)

-0.298

(0.188)

-0.289

(0.187)

-0.306

(0.193)

Level_Rew

0.507

(0.242)*

0.469

(0.250)*

0.478

(0.272)*

0. 443

(0.251)*

Log_TopRew

-0.078

(0.166)

-0.125

(0.172)

-0.090

(0.167)

-0.133

(0.172)

D_Fes

0.598

(0.315)*

0.686

(0.327)*

0.634

(0.324)*

0.728

(0.336)*

Duration

-0.039

(0.023)

-0.036

(0.024)

Team

0.037

(0.045)

0.037

(0.048)

Log_No_Fol

-0.017

(0.130)

-0.014

(0.135)

D_Drama

-0.599

(0.392)

-0.650

(0.404)

D_Comedy

-0.510

(0.359)

-0.613

(0.374)

PreProj

0.723

(0.406)

0.582

(0.411)

D_Fem

0.598

(0.305)*

0.705

(0.320)*

D_CA

0.059

(0.308)

0.004

(0.320)

Notes: *** p<0.001 ** p<0.01 * p<0.05

Reviewer 1

Thank you for your comments. We will address your concerns below and hopefully, you will find them satisfactory. Hope you will find that the current draft is suitable for publication in JTAER.

Hopefully, you will find our response satisfactory.

Table. Summary of logistic regression analysis (Standard errors in the parentheses) N = 209.

Model 1

Model 2

Model 3

Model 4

Intercept

0.582

(1.420)

2.468

(1.794)

0.209

(1.436)

1.983

(1.850)

No_Comp

-0.044

(0.081)

-0.038

(0.083)

-0.035

(0.083)

-0.027

(0.085)

Comp_Int

-0.288

(0.183)

-0.298

(0.188)

-0.289

(0.187)

-0.306

(0.193)

Level_Rew

0.507

(0.242)*

0.469

(0.250)*

0.478

(0.272)*

0. 443

(0.251)*

Log_TopRew

-0.078

(0.166)

-0.125

(0.172)

-0.090

(0.167)

-0.133

(0.172)

D_Fes

0.598

(0.315)*

0.686

(0.327)*

0.634

(0.324)*

0.728

(0.336)*

Duration

-0.039

(0.023)

-0.036

(0.024)

Team

0.037

(0.045)

0.037

(0.048)

Log_No_Fol

-0.017

(0.130)

-0.014

(0.135)

D_Drama

-0.599

(0.392)

-0.650

(0.404)

D_Comedy

-0.510

(0.359)

-0.613

(0.374)

PreProj

0.723

(0.406)

0.582

(0.411)

D_Fem

0.598

(0.305)*

0.705

(0.320)*

D_CA

0.059

(0.308)

0.004

(0.320)

Notes: *** p<0.001 ** p<0.01 * p<0.05

Author Response File: Author Response.docx

Reviewer 2 Report

Review report

The manuscript “Investigating the Impact of Competition and Incentive Design on Performance of Crowdfunding Projects: A Case of Independent Movies” aims at proving the impact of competition and incentive design onto the performance of independent film crowdfunding platforms.

Below I will make several suggestions so the author can improve the current form of the manuscript.

1) In the Introduction, lines 39-41, I would not insist just on the lengthy procedures; this can be one reason, but the literature has it that founders may not be eligible for traditional funding due to uncertainty of future revenues or lack of experience or that the project itself does not make the object of bank loans. Additional references suggested to back these statements: Boeuf, B, Darveau, J & Legoux, R 2014, ‘Financing creativity: Crowdfunding as a new approach for theatre projects’, International Journal of Arts Management, vol. 16, no. 3, pp. 33–48; Kim, T, Por, MH & Yang, SB 2017, ‘Winning the crowd in online fundraising platforms: The role of founder and project features’, Electronic Commerce Research and Applications, vol. 25, pp. 86–94, DOI: 10.1016/j.elerap.2017.09.002; Kunz, MM, Bretschneider, U, Erler, M & Leimeister, JM 2017, ‘An empirical investigation of signaling in reward-based crowdfunding’, Electronic Commerce Research, vol. 17, no. 3, pp. 425–461, DOI: 10.1007/s10660-016-9249-0.

2) In the Introduction, the author mentions as a reason of CF development that founders have better control of their funding process, lines 41-42. However, this may or may not be true. They still have to provide permanent updates to the community and have to inform backers on the progress of the project! Reference needed here, I suggest Prolezza, C, & Splendore, S 2016, ‘Accountability and Transparency of Entrepreneurial Journalism. Unresolved Ethical Issues in Crowdfunded Journalism Projects’, Journalism Practice, vol. 10, no. 2, pp. 196–216, DOI: 10.1080/17512786.2015.1124731. According to the authors, extra accountability is best outsourced and implemented thanks to audience participation! Founders are accountable to the community, too.

3) Please refer to point 2 above for reference stating the opposite of what the author says in lines 51-53. According to certain authors, there is an inverse correlation between the amount required and the success of a CF campaign. High amounts, long waiting time until reward distribution and campaign duration negatively influence the chances of a CF campaign. This point is debatable, I would not insist too much on it!

4) Lines 54-59: in the specific case of movie CF, I suggest the author also mentions other important success factors, such as: empowering the community, using its wisdom and allowing backers to make decisions/suggestions/recommendations about the project and about how it should be completed. References needed, I recommend: M Fanea-Ivanovici 2019, ‘Prosumers: Key Factors for Successful Filmmaking Crowdfunding Projects’, International Journal of E-Services and Mobile Applications, vol. 11, no. 3, pp. 48-60; Gascon, JFF, Rodriguez, JR, Monforte, JM, Lopez, ES & Masip, PM 2015, ‘Crowdfunding as a formula for the financing of projects: an empirical analysis’, Revista Cientifica Hermes, vol. 14, pp. 24–47; Nucciarelli, A, Li, F, Fernandes, KJ, Goumagias, N, Cabras, I, Devlin, S, Kudenko, D & Cowling, P 2017, ‘From value chains to technological platforms : The effects of crowdfunding in the digital game industry’, Journal of Business Research, vol. 78, pp. 341-352, DOI: 10.1016/j.jbusres.2016.12.030).

5) Line 66: rephrasing is needed; maybe the meaning is: reduce the entrepreneurs’ ability of getting resources instead of using resources? This needs to be checked by the author.

6) In paragraph 59-81, I suggest the author briefly explains the role of promoting the project outside the CF platform (other online methods plus the offline environment). The platform is not the only place where the promotion takes place. References suggested: Agrawal, A, Catalini, C & Goldfarb, A 2015, ‘Crowdfunding: geography, social networks, and the timing of investment decisions’, Journal of Economics & Management Strategy, vol. 24, no. 2, pp. 253–274, DOI: 10.1111/jems.12093; Kuppuswamy, V, Bayus, BL 2017, ‘Does my contribution to your crowdfunding project matter?’, Journal of Business Venturing, vol. 32, no. 1, pp. 72–89, DOI: 10.1016/j.jbusvent.2016.10.004; Zvilichovsky, D, Danziger, S, & Steinhart, Y 2018, ‘Making-the-product happen: A driver of crowdfunding participation’, Journal of Interactive Marketing, vol. 41, pp. 81–93, DOI: 10.1016/j.intmar.2017.10.002).

7) Line 72-73: this is also different from lending-based CF, where an interest is earned. Addition needed.

8) Lines 87-89: ‘With little research has focused on these factors, we believe our results have demonstrated the critical role of competition and incentive design’ – rephrasing needed for the first part.

9) Line 112: Less risk for whom? It should be distinguished between founder and backer! Clarification needed.

10) Lines 123-127: for the precise case of film CF, other specific factors should be mentioned: fandom, backers’ involvement in project (prosumerism). References needed: Štofa, T, & Zoricak, M 2016, ‘Selected Success Factors of Crowdfunding Projects’ in J Krajicek, J Nesleha & K Urbanovsky (eds), European Financial System 2016, Proceedings of the 13th International Scientific Conference, Masarykova University, Brno, pp. 752-759; Planells, AJ 2017, ‘Video games and the crowdfunding ideology: From the gamer-buyer to the prosumerinvestor’, Journal of Consumer Culture, vol. 17, no. 3, pp. 620–638 DOI: 10.1177/1469540515611200.

11) Lines 159-161: The author should consider the online and the offline environment alike, and should at least mention that there is also competition beyond the platform (references are above). Strategies include empowering backers and allowing them to be an active part of the project, to become prosumers (references are already mentioned above).

12) In paragraph 178-187, some comments should be made as to the competition among founders. Are all movies really fighting for the money of the same or all backers? Are the movies perfect substitutes for those with money to contribute with? The author should at least discuss a bit about geographical or cultural proximity as an important filter sorting backers and that not all movies compete for the existing money. Although it may be a nuance, it is very important in the context of arts and culture – good and services are not perfect substitutes! Recommended reference: Burtch, G, Ghose, A & Wattal, S 2014, ‘Cultural differences and geography as determinants of online prosocial lending’, MIS Quarterly, vol. 38, no. 3, pp. 773–794, DOI: 10.25300/MISQ/2014/38.3.07.

13) In Hypothesis 1, the author assumes there is no non-price competition among projects, while there is! A clarification should be made for readers to understand that the reality has been simplified and non-price competition ignored in this particular research.

14) Remark about the term donation: a donation is only offered on donation-based CF platforms; if there is a reward, we may refer to it as contribution, as some reward or benefit is expected in exchange (for simple prosocial or humanitarian projects, no reward is expected, case in which the term donation is the right one).

15) Line 314-flexible means AON or TIA? The author should clarify.

16) Lines 573-575. I will only suggest that future research and analysis could distinguish between rewards with monetary vs. affective value.

I do not have any comments about hypothesis testing and results, and congratulate the author on the original approach. Pending mostly nuance and literature review changes/additions/clarifications, the manuscript is valuable and could help film project initiators better design their CF campaigns.

I look forward to reading the improved version of the manuscript and wish the author best of luck in all their endeavours!

Author Response

Below I will make several suggestions so the author can improve the current form of the manuscript.

Thank you for your comments. We will address your concerns below and hopefully, you will find them satisfactory. The manuscript is revised accordingly (we use “Track change” in Microsoft Word to highlight the revision). Hope you will find that the current draft is suitable for publication in JTAER.

1) In the Introduction, lines 39-41, I would not insist just on the lengthy procedures; this can be one reason, but the literature has it that founders may not be eligible for traditional funding due to uncertainty of future revenues or lack of experience or that the project itself does not make the object of bank loans. Additional references suggested to back these statements: Boeuf, B, Darveau, J & Legoux, R 2014, ‘Financing creativity: Crowdfunding as a new approach for theatre projects’, International Journal of Arts Management, vol. 16, no. 3, pp. 33–48; Kim, T, Por, MH & Yang, SB 2017, ‘Winning the crowd in online fundraising platforms: The role of founder and project features’, Electronic Commerce Research and Applications, vol. 25, pp. 86–94, DOI: 10.1016/j.elerap.2017.09.002; Kunz, MM, Bretschneider, U, Erler, M & Leimeister, JM 2017, ‘An empirical investigation of signaling in reward-based crowdfunding’, Electronic Commerce Research, vol. 17, no. 3, pp. 425–461, DOI: 10.1007/s10660-016-9249-0.

Thank you for your comment. We agree with your point and add it as the first reason of crowdfunding development. The first reason in the previous draft is changed to the second reason in the current draft (line 39). We have also added Boeuf et al. 2014 and Kim et al. 2017 in the reference. The related discussion is revised as follows (line 39 of the revised draft):

“First, crowdfunding enables entrepreneurs, especially those who may not be eligible for traditional funding due to uncertainty of future revenue or lack of experience, to finance their creative projects [8, 40]. Second, crowdfunding helps entrepreneurs to get funded without going through the lengthy procedure of applying for financial investment from banks and financial agencies [12, 31].”

Hope you will find our revision satisfactory.

Thank you for your comment. We agree with your point that the phrase “better control” might be misleading. The related discussion of crowdfunding development is revised as follows (line 45 of the revised draft):

“Third, crowdfunding project founders are able to have more flexibility in their funding process while taking accountability to the community [64].”

We have added Prolezza et al. (2016) in the reference. Hope you will find our revision satisfactory.

Thank you for your comment. We have deleted the part of the sentence “small projects are more likely to fail compared with large ones [44].” when we refer to Mollick (2014) because this part is not directly related to the low success rate of crowdfunding. In addition, we agree with you that this point is debatable.

Hope you will find our revision satisfactory.

Thank you for your suggestion. We added empowering the community as a factor of crowdfunding success in the second paragraph of Introduction section (line 64 of the revised draft). We have also added Fanea-Ivanovici (2019) and Nucciarelli et al. (2017) in the reference.

Hope you will find our revision satisfactory.

5) Line 66: rephrasing is needed; maybe the meaning is: reduce the entrepreneurs’ ability of getting resources instead of using resources? This needs to be checked by the author.

Thank you for your comment. We agree with you that it should be “getting” resources instead of “using” resources. The draft is revised accordingly.

Hope you will find our revision satisfactory.

Thank you for your suggestion. We have briefly explained the role of promotion by adding the sentence “Promoting crowdfunding projects might take place outside crowdfunding platform such as other online methods as well as the off-line environment [43, 86].” in the paragraph (line 76 of the revised draft). We have also added Kuppuswamy and Bayus (2017) and Zvilichovsky et al. (2018) in the reference.

Hope you will find our revision satisfactory.

7) Line 72-73: this is also different from lending-based CF, where an interest is earned. Addition needed.

Thank you for your comment. We agree with you that lending-based crowdfunding should be included as well. The related discussion is revised as follows (line 81 of the revised draft): “This is different from of equity-based crowdfunding whose funders can get monetary income such as a share of the invested company and lending-based crowdfunding whose funders can earn an interest.”

Hope you will find our revision satisfactory.

Thank you for your comment. Based on your suggestion, we separate the sentence to two sentences. The revised sentences are as follows (line 98 of the revised draft): “So far little research has focused on these factors. We believe our results have demonstrated the critical role of competition and incentive design.”

Hope you will find our revision satisfactory.

9) Line 112: Less risk for whom? It should be distinguished between founder and backer! Clarification needed.

Thank you for your comment. The term “less risk” is for project founders. We have revised the sentence (line 125 of the revised draft) as: “In addition, KIA strategy leads to less risk and less return for entrepreneurs.”

Hope you will find our revision satisfactory.

Thank you for your comment. We have incorporated the factor of backers’ involvement in the current draft by adding the following paragraph in line 142 of the revised draft:

“Additionally, recent research also focuses on backers’ involvement in project (prosumerism) [25, 61, 74]. For example, Planells analyzed top 10 most funded gaming projects in Kickstarter and concluded that conversion from consumer to prosumer-investor brings positive influence [61]. Fanea-Ivanovici investigated eight successful Romanian movie crowdfunding projects and found that prosumers serve as a key success factor [25].”

We have added Štofa and Zoricak (2016) and Planells (2017) in the reference. Hope you will find our revision satisfactory.

Thank you for your comment. We have incorporated the discussion of off-line competition by adding the following in line 183 of the revised draft: “In addition, competition exists in off-line environment beyond the crowdfunding platform such as promoting crowdfunding projects [1, 86] and converting backers to prosumers of the crowdfunding projects [25, 61].”

We have also revised the last sentence in the same paragraph (line 186 of the revised draft) as “Therefore, project founders need to carefully observe the competition environment and identify applicable strategies such as deciding best timing for entry, growing or exit the crowdfunding platforms and how to empower the backers and attract them to become prosumers.”

Hope you will find our revision satisfactory.

Thank you for your comment. We agree with you that crowdfunding projects in the context of arts and culture including movies are not perfect substitutes. Project founders may not compete for the money from the same backers. To address your concern, we have added the following clarification (in line 221 of the revised draft): “Please note that while project founders compete with each other, their projects (independent movies) might not be perfect substitutes due to geographical and cultural difference [12].”

Hope you will find our revision satisfactory.

Thank you for your comment. To address your concern, we have added the following clarification in the paragraph above Hypothesis 1 (line 254 of the revised draft) as “Please note that we have simplified the competition scenario in real business practice and do not include non-price competition in this research”.

Hope you will find our revision satisfactory.

Thank you for your comment. We agree with you that the term donation might be misleading. Therefore, we have changed “donation” to “contribution” in our paper.

Hope you will find our revised draft satisfactory.

15) Line 314-flexible means AON or TIA? The author should clarify.

Thank you for your comment. We have revised the sentence as “This website not only provides a user-friendly platform for aspiring filmmakers to raise money, but also is a place for lovers of independent film web series and film festivals to discover and enjoy.” (line 368 of the revised draft).

Hope you will find our revised draft satisfactory.

16) Lines 573-575. I will only suggest that future research and analysis could distinguish between rewards with monetary vs. affective value.

Thank you for your comment. We discuss the limitation of our study in line 573-575. Therefore, we assume that what you mention is to add one point of future research. We have revised it as follows (line 652 of the revised draft):

“Third, future research can investigate incentive design of crowdfunding projects with different types of rewards such as monetary rewards versus affective value reward.”

Hope you will find our revised draft satisfactory.

I look forward to reading the improved version of the manuscript and wish the author best of luck in all their endeavours!

Thank you again for all your helpful comments. Hope you will find that our responses satisfactory and the current draft is suitable for publication in JTAER.

Reviewer 3 Report

This study investigates the impact of competition and 14 incentive design on the performance of crowdfunding projects. Drawing upon the literature of entrepreneurship, the authors develop a research model involving key factors such as competition intensity and the number of reward levels. Using real data of 209 independent movie projects of an online crowdfunding platform, they test the proposed hypotheses of the impact of competition and incentive design on crowdfunding success. The results and implications of the study are relevant.

We read in the introduction that "the mechanism of crowdfunding and the success drivers are still not well understood". However, there are a few studies which investigate crowdfunding dynamics taking backers’ perspective, such as the following important studies:

doi.org/10.1007/s11187-020-00330-2

https://link.springer.com/article/10.1007/s11187-016-9826-6

The paper is focused on the level of competition. However, it fails to consider previous studies that have done this. On crowdfunding platforms, multiple projects are competing simultaneously for funding. As modeled by Parker (2014), the number of other investment opportunities affects the occurrence of information cascades. The logic is that when there is a limited number of investors with superior information (here, investors with public profiles) and many good projects, the distribution between them may become thin. In the case of cascades, the (uninformed) crowd follows public investors, hence, many projects, including good ones, may remain unfunded. For specific reference about this effect, the authors should specifically refer to the following paper (see the discussion and results about the variable Competing_Offerings: https://journals.sagepub.com/doi/abs/10.1111/etap.12261

The paper refers quite frequently to “a community”. I like and agree with this. I suggest theoretically ground this argument by drawing from two important papers that highlight how crowdfunding investors consider a community logic. Fisher et al. (2017, Journal of Business Venturing) apply identity logic to identify the logic behind the decision to invest in different types of investors, including crowdfunding. Vismara (2019, Technological Forecasting and Social Change) studies sustainability in equity crowdfunding and highlights that small crowdfunding investors are guided by a community logic to appreciate the sustainability and green orientation of crowdfunding projects. I think that this theory will help in strengthening the theoretical contribution of the paper.

I hope my comments help in bringing it to the next level and hopefully attract broader attention!

Author Response

Thank you for your summary. We will address your concerns below and hopefully, you will find them satisfactory. The manuscript is revised accordingly (we use “Track change” in Microsoft Word to highlight the revision). Hope you will find that the current draft is suitable for publication in JTAER.

https://link.springer.com/article/10.1007/s11187-016-9826-6

Thank you for your comment. We have revised the sentence you mentioned (line 67 of the revised draft) as “the mechanism of crowdfunding success is still not well understood” because we want to focus on the topic of crowdfunding performance.

Based on your comment, we have added the following discussion of crowdfunding dynamics from the perspective of backers in the section of literature review (line 146 of the revised draft) as follows: “Current studies also explored crowdfunding dynamics from the perspective of backers. Block et al. classified new players in entrepreneurial finance including crowdfunding backers based on supply- and demand- side factors [5]. Block et al. compared two entrepreneurial finance market segments of the future: crowdfunding and initial coin offerings [6].”

We have added the two papers you provided in the reference.

Hope you will find our revision satisfactory.

Reference

Block, M. Colombo, D. Cumming, S. Vismara, New players in entrepreneurial finance and why they are there, Small Business Economics, vol. 50, no. 239 - 250, 2018.
Block, A. Groh, L. Hornuf, T. Vanacker, S. Vismara, The entrepreneurial finance markets of the future: A comparison of crowdfunding and initial coin offerings, Small Business Economics, forthcoming, 2020.

Thank you for your comment. Based on your advice, we have incorporated previous studies related to competition in crowdfunding platforms. To be specific, we have added the following paragraph in the literature review section (line 192 of the revised draft):

“Prior research examined the competition due to information cascades as well. Parker suggested that competing crowdfunding projects might lead to information cascades [59]. Vismara also reported this specific effect in equity crowdfunding [78]. He claimed that when there are information cascades in crowdfunding platform, the uninformed crowd will follow investors with public profiles. As a result, many projects (even good projects) might remain unfunded. Nevertheless, factors of competition environment such as number of competitors and competition intensity are overlooked in prior studies.”

We have added the two papers you provided in the reference.

Hope you will find our revision satisfactory.

Reference

Parker, Crowdfunding, cascades, and informed investors, Economic Letters, vol. 125, no 3, pp. 432 - 435, 2014.
Vismara, Information cascades among investors of equity crowdfunding, Entrepreneurship Theory and Practice vol. 42, no. 3, pp. 467- 497, 2018.

Thank you for your comment. Following your suggestion, we have incorporated the theory of community logic in line 322 of the revised draft when discussing the Hypothesis 5 (movie festival effect) as follows:

“Theory of community logic also suggests that crowdfunding backers concede a contribution as a form of cooperative capitalism [26, 79]. Fisher et al. claimed that when crowdfunding backers are drawn to invest in the project, they consider it as an identity and a commitment of the community [26]. Vismara found that restricted investors follow a community logic when they invest in sustainability-oriented equity crowdfunding [79].”

We also mention community logic in line 596 of the revised draft when discussing the practical implications of our study.

“Project founders need to carefully design their crowdfunding appeals such as attending movie festivals and create connection ties between their projects and the community of funders [26].”

We have added the two papers you provided in the reference.

Hope you will find our revision satisfactory.

Reference

Fisher, D. Kuratko, J. Bloodgood, J. Hornsby, Legitimate to whom? The challenge of audience diversity and new venture legitimacy, Journal of Business Venture, vol. 32, no. 1, pp. 52 - 71, 2017.
Vismara, Sustainability in equity crowdfunding, Technological Forecasting and Social Change, vol. 141, pp. 98 - 106, 2019.

I hope my comments help in bringing it to the next level and hopefully attract broader attention!

Thank you again for all your helpful comments. Hope you will find that our responses satisfactory and the current draft is suitable for publication in JTAER.

Reviewer 4 Report

Thank you for the opportunity to read this paper. In this study, the author developed a research model involving key factors such as competition intensity and the number of reward levels. Using real data of 209 independent movie projects of an online crowdfunding platform, the author tested the proposed hypotheses of the impact competition and incentive design on crowdfunding success. This is an interesting research question, but the current version has a number of problems, the most problematic of which is the lack of an academic definition of the research question in a good style. Here are my detailed suggestions as follows.
1. There are some typographical errors.
2. It is suggested that the author refine the research questions and put forward the research questions from the perspective of entrepreneurs. That is, the variables that entrepreneurs can control, such as the amount and return of investment. And some variables that are not controlled by entrepreneurs should not be included in the model, such as the intensity of competition. Because competition intensity is the current situation of the whole market, entrepreneurs have no way to deal with it. This variable is suitable to be used as a control variable.
3. The author chose the movie industry, which is very good and has enough differentiation from other similar studies. However, in the current version of the paper, the particularity of the movie industry is not enough. It is suggested to highlight the differences between movies and other projects, which can better reflect your research innovation.
4. The literature review section is messy. Please review it in an improved and well-organized way.
5. Can the fame of entrepreneurs and the theme of the movie be included as control variables?
6. Whether some variables present a moderating effect, such as financing goals, entrepreneur experience, etc.?

Author Response

There are some typographical errors.

Thank you for your comment. We have gone through the revised draft several times to correct the typographical errors. Hope you will find our revised draft satisfactory.

It is suggested that the author refine the research questions and put forward the research questions from the perspective of entrepreneurs. That is, the variables that entrepreneurs can control, such as the amount and return of investment. And some variables that are not controlled by entrepreneurs should not be included in the model, such as the intensity of competition. Because competition intensity is the current situation of the whole market, entrepreneurs have no way to deal with it. This variable is suitable to be used as a control variable.

Thank you for your comment. We include competition in our research model to investigate whether it plays a significant role in crowdfunding performance. Literature of entrepreneurship suggests that competition environment is a critical factor for entrepreneurs’ performance. Reviewer 3 also pointed out that prior studies of crowdfunding such as Parker (2014) and Vismara (2018) have examined factors related to competition environment. They pointed out that information cascades among crowdfunding backers might lead to competition, which justifies the need of studying competition in crowdfunding platforms.

We agree with you that existing research often explores features of crowdfunding projects set by entrepreneurs such as target funding, duration, verbal description, etc. Having said that, we find that prior studies investigated factors not controlled by entrepreneurs as well. For example, Harrison and Mason (2007) studied the impact of gender of entrepreneurs. Josefy et al. (2017) studied the role of community such as the percentage of population employed in the visual, applied, and performing art. While these factors are not likely to be changed by project founders, they appear to be essential factors in crowdfunding success. In addition, return of investment are not commonly used in crowdfunding projects. Thus, we do not include it in our research model.

Hope you will find our clarification satisfactory.

Reference

Harrison, and C. Mason, Does gender matter? Women business angels and the supply of entrepreneurial finance, Entrepreneurship Theory and Practice, vol. 31, no.3, 445–472, 2007.

Josefy, T. Dean, L. Albert, and M, Fitza. Role of community in crowdfunding success: evidence on cultural attributes in funding campaigns to “save the local theater”, Entrepreneurship Theory and Practice, vol. 41, no.2, 161–182, 2017.

Parker, Crowdfunding, cascades, and informed investors, Economic Letters, vol. 125, no 3, pp. 432 - 435, 2014.

Vismara, Sustainability in equity crowdfunding, Technological Forecasting and Social Change, vol. 141, pp. 98 - 106, 2019.

3. The author chose the movie industry, which is very good and has enough differentiation from other similar studies. However, in the current version of the paper, the particularity of the movie industry is not enough. It is suggested to highlight the differences between movies and other projects, which can better reflect your research innovation.

Thank you for your comment. To address your concern, we have added discussion of the difference between movies and other projects in line 348 of the revised draft as follows:

“Movies differ from other projects in the following ways. First, the creativity of endeavor of movies focuses on the perspective of entertainment. This is different from technology projects which focus on innovation of new technologies and skills. Second, the outcome of a movie project is in some senses intangible which is different from tangible outcomes such as food, craft, and fashion. In addition, movie projects usually incorporate verbal, audio, and visual contexts in one project, which is different from other art and cultural projects such as music, dance, photography, publishing, etc.”

Hope you will find our revision satisfactory.

The literature review section is messy. Please review it in an improved and well-organized way.

Thank you for your comment. To address your concern, we have revised the section of Literature Review the following aspects. First, we divide this section into two subsections: 2.1 Literature of crowdfunding and 2.2 Literature of entrepreneurship. We believe the section is better organized in the current draft. Second, we improve the writing by making the discussion more concise in the current section. Third, we condense the discussion of prior studies of online movie in e-commerce at the end of this section. Lastly, we have incorporated comments of reviewer 2 and reviewer 3 in the section of literature review.

Hope you will find our revised literature review section of satisfactory.

Can the fame of entrepreneurs and the theme of the movie be included as control variables?

Thank you for your comment. We agree with you that the fame of entrepreneurs can be used as control variable. However, it is difficult to quantify and measure. Therefore, we use entrepreneurs' prior experience (measured by number of previous projects) as control variable. Following your suggestion, we have classified the movies into three types based on their theme: Drama, Comedy and Others. We created two new dummy variables to control the theme type. D_Drama equals one if the type of movie is drama and zero otherwise. Similarly, D_Comedy equals one if the type of movie is comedy and zero otherwise. We have conducted the regression analysis with the added dummy variables. The tables below present the results.

Hope you will find our revised draft satisfactory.

Table 1. Summary Statistics.

Variable	Definition	Min	Average	Max	Standard Deviation
No_Comp	Number of competitors	0	2.517	6	1.853
Comp_Int	Competition intensity	0	0.872	7.442	0.809
Level_Rew	Number of reward levels (per $1000 of funding target)	0.11	1.170	6.154	0.888
Log_TopRew	Log of the contribution level of getting the top reward	4.065	7.575	11.513	1.057
D_Fes	Dummy variable: 1 for attending movie festival, 0 otherwise	0	0.368	1	0.484
Duration	Number of days of the project in the platform	15	32.928	60	6.049
Team	Number of team members with brief introduction	2	6.254	20	3.446
Log_No_Fol	Log of the number of followers in social network	2.197	5.801	9.622	1.180
D_Drama	Dummy variable: 1 for movie with drama theme, 0 otherwise	0	0.292	1	0.456
D_Comedy	Dummy variable: 1 for movie with comedy theme, 0 otherwise	0	0.368	1	0.484
PreProj	Number of previous crowdfunding projects	0	0.158	3	0.469
D_Fem	Dummy variable: 1 for female producer, 0 otherwise	0	0.574	1	0.496
D_CA	Dummy variable: 1 for producer from California, 0 otherwise	0	0.421	1	0.495

Table 2. Correlation matrix of variables.

	1	2	3	4	5	6	7	8	9	10	11	12	13
1. No_Comp	1
2. Comp_Int	0.12*	1
3. Level_Rew	0.03	0.04	1
4. Log_TopRew	-0.01	0.00	-0.51***	1
5. D_Fes	0.05	-0.07	0.03	0.13*	1
6. Team	0.00	0.03	0.15**	0.03	-0.05	1
7. Log_No_Fol	0.03	-0.04	-0.13*	0.17**	-0.03	0.02	1
8. Duration	0.07	0.00	-0.08	0.06	0.04	-0.05	-0.00	1
9. D_Drama	0.08	-0.09	0.12*	-0.13*	0.10	0.02	0.01	-0.04	1
10. D_Comedy	-0.09	0.11*	-0.07	0.02	-0.07	-0.06	-0.02	-0.01	-0.49***	1
11. PreProj	-0.02	-0.07	0.06	-0.02	-0.02	0.22***	-0.03	-0.04	0.03	-0.09	1
12. D_Fem	-0.06	0.05	0.04	-0.05	-0.04	-0.11	-0.06	-0.06	0.00	0.16**	-0.06	1
13. D_CA	0.06	0.02	-0.15**	0.14**	0.11	-0.06	-0.15**	-0.00	0.10	0.03	-0.02	0.05	1

Notes: *** p<0.01, ** p<0.05, * p<0.1

Table 3. Summary of regression analysis (Standard errors in the parentheses) N = 209.

	Model 1	Model 2	Model 3	Model 4
Intercept	101.187 (10.677)***	115.227 (13.218)***	91.717 (10.699)***	107.643 (13.356)***
No_Comp	-1.605 (0.621)*	-1.459 (0.624)*	-1.552 (0.617)*	-1.422 (0.622)*
Comp_Int	-3.049 (1.425)*	-3.267 (1.434)*	-3.033 (1.417)*	-3.238 (1.428)*
Level_Rew	3.656 (1.499)*	3.188 (1.528)*	3.528 (1.498)*	3.113 (1.528)*
Log_TopRew	-0.254 (1.268)	-0.468 (1.292)	-0.304 (1.259)	-0.536 (1.287)
D_Fes	7.901 (2.401)**	8.480 (2.415)***	7.988 (2.394)***	8.586 (2.414)***
Duration		-0.320 (0.178)		-0.290 (0.178)
Team		0.425 (0.337)		0.388 (0.344)
Log_No_Fol		-0.571 (0.981)		-0.325 (0.992)
D_Drama		-3.216 (2.906)		-3.434 (2.908)
D_Comedy		-0.352 (2.718)		-0.843 (2.742)
PreProj			4.543 (2.420)	3.797 (2.480)
D_Fem			4.023 (2.297)	4.201 (2.344)
D_CA			1.880 (2.236)	1.478 (2.385)
Adjusted R-square	0.1166	0.1233	0.1339	0.1360

Notes: *** p<0.001 ** p<0.01 * p<0.05

Whether some variables present a moderating effect, such as financing goals, entrepreneur experience, etc.?

Thank you for your comment. We want to focus on the impact of competition and reward design on crowdfunding performance in this study. Therefore, we have not explored the moderating effects of control variables such as funding target and entrepreneurs’ prior experience. We agree with you that this is an interesting research question. We have added your point as a direction of future research in the last section (line 654 of the revised draft).

Hope you will find our clarification satisfactory.

Round 2

Reviewer 3 Report

I thank the authors for incorporating so well my comments into the paper!

Author Response

We are very thankful for reviewer’s positive comment and insightful suggestions during the review process. Hope you will find that the current draft is suitable for publication in JTAER.

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Investigating the Impact of Competition and Incentive Design on Performance of Crowdfunding Projects: A Case of Independent Movies

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