Gender Dynamics in Crowdfunding (Kickstarter): Evidence on Entrepreneurs, Backers, and Taste-Based Discrimination
Hadar Gafni, Dan Marom, Alicia Robb, Orly Sade
Review of Finance, Volume 25, Issue 2, March 2021, Pages 235–274, https://doi.org/10.1093/rof/rfaa041
This study focuses on the launch phase of the leading reward-based crowdfunding market – Kickstarter. It documents the behaviour of male and female entrepreneurs in raising early-stage capital. The structure of this new digital market, which is open to the crowd rather than being dominated by a small number of gatekeepers, promises to reduce cultural barriers usually faced by participants in the traditional financial market. In this paper, we investigated whether the launch of Kickstarter (a leading reward-based crowdfunding platform) has resulted in progress towards fulfilling this promise.
We find that women share as entrepreneurs in the platform (34.7%) does not equal to their share in the overall population, and they are concentrated in stereotyped sectors, both as entrepreneurs and as backers. We also find that women do not set lower funding goals than men, they enjoy higher rates of success than men, even after controlling for project categories and funding goals, and that backers of both genders have a tendency to fund entrepreneurs of their own gender. Our survey of Kickstarter backers finds evidence of taste-based discrimination by male backers.
This manuscript offers several important contributions to the entrepreneurial finance literature. First, we enrich research on crowdfunding as a new method of financing while contributing to two other streams of the literature: gender and finance, and gender and entrepreneurship. Even though the own-gender bias is present on crowdfunding platforms, with a more diverse pool of funders and smaller amounts of capital involved, women feel more confident to start their own projects, set funding goals quite similar to men’s, and enjoy higher rates of success than men.
Second, by comparing the backers’ responses to the survey with their observed actions, we provide a method for detecting taste-based discrimination, unlike other studies in the economic discrimination literature, which rely mainly on negating the existence of statistical discrimination to suggest a taste-based one.
Clearly, we are only beginning to see the impact of crowdfunding on broader economic activity in the financial market. A whole host of future research efforts will be needed to further investigate the contribution of this new funding instrument.