In recent years, crowdfunding platforms have gained importance in the financing industry. An emerging issue is that only a fraction of investors decide to reinvest after the initial investment experience. One key factor that might be responsible for low reinvest rates, which ultimately results in lower crowdfunding success and unsustainable crowdfunding platforms, is dissatisfaction.
OBJECTIVE:
This paper aims to shed light on the repercussions of dissatisfying investment experiences. First, the authors investigate to what degree individuals’ dissatisfaction with a crowdfunding platform’s founders has a direct negative impact on their decision to continue investing on the platform. Second, this study examines whether the emergence of individuals’ distrust in a platform’s founders is a consequence of dissatisfaction and how this influences their decision to reinvest in projects on the platform.
METHODS:
The authors develop a modified version of the extended valence framework (cf., Kim et al. [1]) to investigate the relationships among dissatisfaction, distrust, perceived benefit, perceived risk, and intention to continue investing. The research model was analyzed using a partial least square analysis approach based on a sample of 233 respondent that participated in an online questionnaire.
RESULTS:
Our findings show that dissatisfaction, directly and indirectly, affects individuals’ intention to continue investing. Distrust is found to be an essential mediator between dissatisfaction and intention to continue investing. Furthermore, the effect of distrust on backers’ intention to reinvest is fully mediated by perceived benefit and risk, which are both found to be important determinants of their intention to reinvest, while perceived benefit exhibits a stronger absolute effect.
CONCLUSIONS:
This study provides significant contributions to the related literature. It explains why platforms might suffer from low reinvestment rates. Furthermore, it sheds light on the crucial role of distrust in the crowdfunding context. Theoretical and managerial implications are discussed.
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