The round number heuristic and entrepreneur crowdfunding performance

We document a novel pattern that campaign goal amounts set by entrepreneurs on Kickstarter exhibit clear clustering at round numbers. We propose that the round number heuristic, a tendency to adopt round numbers as cognitive shortcuts when facing complicated and uncertain situations, may explain the...

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Bibliographic Details
Published in:Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2021-06, Vol.68, p.101894, Article 101894
Main Authors: Lin, Tse-Chun, Pursiainen, Vesa
Format: Article
Language:English
Subjects:
Crowdfunding performance
Entrepreneur
Fintech
Kickstarter
Round number heuristic
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Summary:We document a novel pattern that campaign goal amounts set by entrepreneurs on Kickstarter exhibit clear clustering at round numbers. We propose that the round number heuristic, a tendency to adopt round numbers as cognitive shortcuts when facing complicated and uncertain situations, may explain the clustering pattern and predict campaign outcomes. Based on 162,863 campaigns between 2009 and 2017, we find a negative relation between the use of round goal amounts and the likelihood of campaign success. Our findings suggest that setting a round number goal conveys useful information about entrepreneur quality that could be used by campaign backers or platforms. •Campaign goal amounts on Kickstarter exhibit clear clustering at round numbers.•Round goal amounts are associated with lower likelihood of funding success.•Use of round numbers conveys useful information about entrepreneur quality.•Entrepreneurial experience mitigates reliance on round number goals.
ISSN:0929-1199
1872-6313
DOI:10.1016/j.jcorpfin.2021.101894