An Economic Analysis of Crowdfunding

The main focus of this paper is to determine how entrepreneur’s specific characteristics affects her choice between “All-Or-Nothing” (AON) and “Keep-It-All” (KIA) funding types of crowdfunding campaigns. To perform the analysis, two-step estimation procedure for probit regression with instrumental variables was implemented. The obtained results indicate that the number of previously created campaigns is significantly negatively associated with the probability of choosing KIA type. At the same time, entrepreneurs who have previously supported other fundraisers are more likely to use KIA funding type. Additionally, number of project team members also positively affects the choice of KIA funding. Moreover, KIA campaigns are less likely to meet their fundraising targets since they are supposed to be more risky for investors.