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The Dark Side of Entrepreneurial Crowdfunding THE DARK SIDE OF ENTREPRENEURIAL CROWDFUNDING By STEVEN ANDREW CREEK A dissertation submitted in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY WASHINGTON STATE UNIVERSITY Carson College of Business MAY 2018 © Copyright by STEVEN ANDREW CREEK, 2018 All Rights Reserved © Copyright by STEVEN ANDREW CREEK, 2018 All Rights Reserved To the Faculty of Washington State University: The members of the Committee appointed to examine the dissertation of STEVEN ANDREW CREEK find it satisfactory and recommend that it be accepted. Arvin Sahaym, Ph.D., Chair Thomas H. Allison, Ph.D. John B. Cullen, Ph.D. ii ACKNOWLEDGEMENTS As a Christian, I first and foremost “give thanks to the Lord, for he is good and his love endures forever (1 Chronicles 16:34).” This dissertation would not have been possible without God and the people he brought into my life. The first of those people are Dr. Fred David and Dr. Kay M. Poston of Francis Marion University and Dr. Denny Bates of Quality Leadership Consultants, who I thank for their support and encouragement as I applied for admittance into the Ph.D. Program at Washington State University. I owe much of my success during my four years at WSU to faculty members in the Carson College of Business. Above all, I would like to thank my committee chair, Dr. Arvin Sahaym, for accepting me into the program in 2014 and his unending mentorship since. His desire to grow me into an academic has changed my life and leaves me forever indebted. I also greatly appreciate my other committee members, Dr. Thomas H. Allison and Dr. John B. Cullen, whose input has been invaluable both to this dissertation and my Ph.D. journey as a whole. I would also like to acknowledge Dr. Kristine M. Kuhn, who along with Dr. Sahaym coauthored my first publication, as well as Dr. Paul F. Skilton and Dr. Benjamin J. Warnick who coauthored conference papers. Lastly, I would like to thank my seminar and methods professors who vastly improved my understanding of business and statistics: Dr. Sahaym, Dr. Cullen, Dr. Kuhn, Dr. Babu J. Mariadoss, Dr. Jeffrey Joireman, Dr. Leonard Burns, and Dr. Craig D. Parks. I also thank my peers, many of which I now call friends, who have toiled with me through exams, teaching assistantships, and research. Overall, my Ph.D. program experience was greatly improved by riding the highs and lows with my cohort Josh, Eunie, Amir, and Edwin, in addition to Pyayt, Zafrin, Nara, Smita, Chandresh, Lawrence, and other students in the Management, Information Systems, and Entrepreneurship department. A special thank you to iii Joshua D. Maurer and Dr. Pyayt P. Oo, fellow students who have contributed to past and present research projects of mine. I would lastly like to thank my family. Thank you to my parents, who instilled in me the work ethic required to complete this degree. Thank you to my sister, Kristina, for late night conversations and last minute proof reading. Thank you to my son, Peter, for making me shut down the computer each morning and constantly reminding me of the important things in life. My deepest appreciation is owed to my wife, Irina, who without hesitation picked up and moved across the country to allow me to pursue my Ph.D. studies. This dissertation could not have been accomplished without her unparalleled support and positivity throughout the last four years. iv THE DARK SIDE OF ENTREPRENEURIAL CROWDFUNDING Abstract by Steven Andrew Creek, Ph.D. Washington State University May 2018 Chair: Arvin Sahaym This dissertation takes a three essay approach to examining the dark side of entrepreneurs who use crowdfunding to finance new ventures. The first essay explores the influence of legitimacy and celebrity on some of the most successful crowdfunding campaigns. I examine the roles of supportive and challenging media frames in the twin domains of pragmatic and moral legitimacy, and their impact on crowdfunding performance. Using a content analysis of 459 news articles written about lucrative Kickstarter campaigns, I find an increase in capital raised through crowdfunding when the pragmatic or moral legitimacy of the campaign is supported in media frames. While celebrity founders attract more money overall, lesser-known founders can reduce this discrepancy when media outlets promote their moral legitimacy. The second essay investigates the impact of funding from family members, friends, and self-backing on crowdfunding outcomes. I employ a mixed methods research design which includes a survey of crowdfunding project founders. My results highlight the importance of offline social capital and reveal that self-backing is a prevalent practice among crowdfunding campaign founders. External social capital and late-stage self-backing are found to be linked to both campaign success and total amounts raised while early-stage self-backing is not. v Dark personality traits and their influence within the context of crowdfunding is the focus of my third essay. While prior research has examined the importance of positive psychological traits to entrepreneurship, much less attention has been given to dark personality traits. Drawing on social exchange and life history theories, I propose that the dark triad (comprised of the malevolent traits narcissism, psychopathy, and Machiavellianism) affect funding levels differently contingent upon the type of crowdfunding campaign chosen by the founder. I analyze data involving 328 campaigns from a variety of web platforms to examine these differences, and find that crowdfunding narratives high in narcissism attract less funding in rewards-based campaigns while narratives high in psychopathy raise more money in equity campaigns. Overall, dark personalities were found to be beneficial to entrepreneurs utilizing equity crowdfunding but harmful to individuals using rewards-based platforms. vi TABLE OF CONTENTS Page ACKNOWLEDGEMENTS .......................................................................................................... iii ABSTRACT ................................................................................................................................... v LIST OF TABLES ....................................................................................................................... viii LIST OF FIGURES .......................................................................................................................ix CHAPTER 1. INTRODUCTION ......................................................................................................... 1 2. ESSAY ONE .................................................................................................................5 “Lucrative Legitimacy: Media Influence of the Public Perception of Elite Crowdfunding Campaigns” 3. ESSAY TWO ............................................................................................................... 45 “Offline Social Capital and the Dark Side of Online Crowdfunding” 4. ESSAY THREE ........................................................................................................... 70 “The Dark Triad and Entrepreneurial Fundraising: A Comparison of Rewards-Based and Equity Crowdfunding Campaigns” 5. DISSERTATION SUMMARY AND GENERAL CONCLUSIONS .................. 103 vii LIST OF TABLES 1.1 Types of Crowdfunding……………………………………………………………………....3 2.1 Descriptive Statistics and Correlations for Essay One………………………………………30 2.2 Clustered Regression Model Results for Money Raised Post-Publication………………….32 2.3 Clustered Regression Model Results for Total Amount Raised…………………………….33 3.1 Crowdfunding Founder Descriptives……………………………………………….……….57 3.2 Funding Source Descriptives………………………………………………….…………….58 3.3 Means, Standard Deviations, and Pearson Correlations for Essay Two…………….……....59 3.4 Regression Models of Total Amount Raised and Campaign Success……………………….60 4.1 Word List and Examples for Dark Triad Traits……………………………………………..84 4.2 Descriptive Statistics and Pearson Correlations for Crowdfunding Subsamples………..….88 4.3 Regression Models of Total Amount Raised for Subsamples……………………………....89 4.4 Descriptive Statistics and Pearson Correlations for Full Sample……………………………90 4.5 Regression Models of Total Amount Raised for Full Sample…….…………………………91 viii LIST OF FIGURES 2.1 Supported Moral Legitimacy & Celebrity Founder Interaction…….…………….………...34 4.1 Dark Triad x Crowdfunding Type Interaction…………………………...………………….92 ix Dedication This dissertation is dedicated to my wife, Irina. I will forever be a student of your unwavering love and patience. x CHAPTER ONE INTRODUCTION My dissertation focuses on crowdfunding, an increasingly coming method that entrepreneurs use to acquire financial capital. Crowdfunding is gaining traction in both research and practice. Unlike more traditional approaches to financing, crowdfunding involves soliciting small contributions from a large amount of people, typically via the internet. Existing research focuses primarily on legitimate techniques for getting the most out of crowdfunding campaigns. My dissertation, which is comprised of three essays, represents the first research which examines the opposite side of the coin: illegitimate actions or gray areas that certain crowdfunding founders have tried to leverage. The essay in Chapter 2 examines how various forms of legitimacy portrayed in the media influence funding success. I suggest that celebrity founders have a large advantage, but that the advantage can be reduced through attracting legitimacy. In Chapter 3, I seek to understand the origins
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