LAUSR

Abstract Despite a growing body of research that has investigated the impacts of social effect on the amount pledged in crowdfunding, some questions remain unclear. How does herding behavior influence the performance in supplier innovation crowdfunding, and is such behavior rational? What are the primary mechanisms of herding behavior? Based on a panel data set from Kickstarter, we find that it is rational herding rather than information cascade that has a positive effect on the performance in supplier innovation crowdfunding, that is, later backers will combine their private information about projects with others’ contributions to make decisions. Prior contribution acts as the quality signal and affects the later crowdfunding performance. The empirical studies also testify that information asymmetries, word of mouth effect, network effect, and rational behavior are the primary mechanisms of herding in supplier innovation crowdfunding.