To Which Extend Do Material Incentives Matter? A Study on Backers’ Motivation behind Crowdfunding Behaviour Master Thesis Student: Jun Zhang (10742239) MSc. in Business Administration - Entrepreneurship and Innovation Faculty of Business and Economics of UvA Supervisor: First Supervisor: Dr. G.T. Vinig Second Supervisor: Dr. W. van der Aa Date: 26 Jun 2015 (Final Version) Statement of Originality This document is written by Student Jun Zhang, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. Page 2 of 91 Contents Acknowledgement ..................................................................................................................... 5 Abstract ...................................................................................................................................... 6 1. Introduction ........................................................................................................................ 7 1.1 Academic Relevance ................................................................................................. 10 1.2 Managerial Relevance ............................................................................................... 11 1.3 Thesis Outline ........................................................................................................... 11 2. Literature Review ............................................................................................................. 11 2.1 Crowdfunding and Key players................................................................................. 12 2.2 Studies on Backers’ Motivation and Funding Behaviour ......................................... 16 2.3 Intrinsic Motivation and Incentives........................................................................... 18 2.4 Friends and Families (FF) ......................................................................................... 24 3. Methodology ..................................................................................................................... 26 3.1 Research Design ........................................................................................................ 27 3.2 Data Collection .......................................................................................................... 33 3.3 Analytical Strategies ................................................................................................. 34 4. Results .............................................................................................................................. 37 4.1 Sample Characteristic ................................................................................................ 37 4.2 Test of Hypothesis ..................................................................................................... 41 4.3 Cross-classification ................................................................................................... 52 4.4 Other findings ............................................................................................................ 59 5. Discussion and Conclusion ............................................................................................... 61 5.1 General discussion of results ..................................................................................... 61 5.2 Academic and Practical Contribution ....................................................................... 65 5.3 Limitation and Suggestions for Future Research ...................................................... 67 References ................................................................................................................................ 69 Appendix 1. Survey Questionnaire .......................................................................................... 73 Appendix 2. Platform Contacted and the Email Sent .............................................................. 84 Appendix 3. Messages Sent to Individuals on CF Platform .................................................... 87 Appendix 4. Message Sent at LinkedIn ................................................................................... 88 Appendix 5. Facebook Groups Chosen and Messages Posted ................................................ 90 Page 3 of 91 Table of Figures Figure 1: Amount Raised on Crowdfunding Platform (Data resource: crowdsourcing.org) ..... 7 Figure 2: Google Trend: Crowdfunding .................................................................................... 8 Figure 3: Number of Crowdfunding Platforms worldwide, Source: Crowdfunding Industry Report, May 2012, P12 ............................................................................................................ 15 Figure 4: Self-determination Continuum and Backers' Motivation, Adapted from Gagné and Deci (2005) .............................................................................................................................. 20 Figure 5: Campaign Number and Success Situation from Feb 1st to Mar 16, 2015, Data Source: Krowster.co .............................................................................................................................. 21 Figure 6: Conceptual Model (Self-sourced) ............................................................................ 26 Figure 7 Sample Statistic Graph .............................................................................................. 39 Figure 8: Histogram of IntrinsicCF and Intrinsic PJ ................................................................ 40 Figure 9: Data Distribution of Number Backed and Amount Contributed .............................. 41 Figure 10: Result of Hypothesis .............................................................................................. 52 Figure 11: Hypothesis Test Result on Reward-based Group ................................................... 55 Figure 12: Hypothesis Test Result on LinkedIn Group ........................................................... 56 Figure 13: Hypothesis Test Result on Facebook Group .......................................................... 56 Figure 14: Hypothesis Test Result on LinkedIn Group (Reward-based) ................................ 58 Figure 15: Hypothesis Test on Facebook Group (Reward-based) ........................................... 58 Page 4 of 91 Acknowledgement This is the last assignment of my Master Degree (Innovation and Entrepreneurship track) at Universiteit van Amsterdam. No words can express the feeling I have right now, as the past year has witnessed more than what I could have experienced in 10 years had I chosen to still stay in China. Getting away from a city one had lived for over 35 years and studying again after graduating 14 years earlier wasn’t an easy decision, and I wouldn’t have gone this far without the support given by people on my way. I would like to take this opportunity to extend my sincere gratitude to them. Firstly, I would like to thank my supervisor Dr. Vinig for his continuous support and inspiring advices during the completion of this thesis. Without his encouragement and instructions, this thesis wouldn’t have achieved the results I am presenting right now. Secondly, I would like to thank Dr. Van der Aa and other lecturers for designing this educational program, and for challenging and pushing the limits of our knowledge and skills. I also would like to thank Ms. Charlotte Yeh and the team from the students’ service, without whom, we wouldn’t have been able to better focus on our study. Next, great appreciation will be extended to all the participants and everyone who showed willingness to support my research. Last but not least, many thanks to my dearest family and friends: my parents for unconditionally supporting all my life decisions, my partner Chris for being there for me all the time and my son Max for understanding my absence when he needs a “playmate”. Jun Zhang Page 5 of 91 Abstract Backers’ motivation in CF activities has got increasingly more attention over time. Previous studies had approached the subject from economic, marketing and consumer’s perspective, few were done based on modern motivation models. In the meantime, most of motivation models were tested under management or educational settings, other situations often receive very little interest, and have yet to be fully explored. This paper combined modern motivation models and CF studies, intended to uncover a connection between intrinsic motivation, incentives and backers’ behaviour. After reviewing related literatures, a conceptual model with 10 hypothesis was proposed. The feedback from 212 people was collected, one hypothesis was accepted, three were rejected and others had different outcomes when tested in different group settings. The results shows that intrinsic motivation, incentives and family & friend relationships plays a significant role in predicting the likelihood of backers’ activity. The difference in effects are discussed in extent in later chapters. Page 6 of 91 1. Introduction Crowdfunding (herein after referred to as “CF”), as a new method of fundraising for individuals and organizations, has gained rapid development within the past 5 years. Based