EFFECTS OF EARLY PARTICIPATION IN LOTTERIES ON SUBSEQUENT INVESTMENT BEHAVIORS IN CROWDFUNDING: AN ENGAGEMENT THEORY

Prior studies of the effects of lotteries in crowdfunding have reported mixed findings. We contribute to the debate by asking how early lottery participation influences continued investment and peer investment in a subsequent stage, seeking to identify tactics that project creators can apply to optimally leverage the role of early lottery participation. Drawing on engagement theory, we develop and test a model using data from 424 projects collected from a Chinese crowdfunding platform. Results demonstrate that early lottery participation has a significant effect on continued investment (i.e., the investment of early lottery participants), but a nonsignificant effect on peer investment (i.e., the investment of non-early participants). Dynamic interaction between project creators and backers enhances the effects of early lottery participation on continued investment and peer investment.