Infectious Confidence: Unraveling the Effects of Confidence Contagion on Overfunding in Equity Crowdfunding

Yijing Li, Fei Liu, Eric Lim, Chee Wee Tan, Yong Liu

Research output: Journal article publicationJournal articleAcademic researchpeer-review


Overfunding was touted as extraordinary success in equity crowdfunding since fundraisers receive more funds than the intended funding goal. A novel theoretical lens is in demand for comprehending why funders show an exceptional level of enthusiasm in supporting certain equity crowdfunding campaigns that far exceeds their fundraisers’ original expectations. Building on extant literature on contagion effect, we construct a research model that posits confidence contagion enacted by confidence cues embedded in campaign materials as a key driver of overfunding. Our hypotheses were validated in two complementary empirical studies. In Study 1, we manipulated confidence cues in a controlled experiment to verify the enactment of confidence contagion at the individual level. Analytical results indicate that individual funders can detect self-confidence traits from confidence cues embedded in campaign materials and assimilate fundraisers’ confidence via a spontaneous social appraisal mechanism. In turn, confidence contagion can drive funders to congregate and invest in a campaign. In Study 2, we analyzed a secondary dataset collected from a leading equity crowdfunding platform to discern how confidence contagion drives overfunding at the collective level. By modeling funding activities as a Hawkes process, we derived three key metrics that govern the emergence and magnitude of funding surges. We demonstrated that these metrics of funding surges mediate the impact of confidence cues on the level of overfunding for each equity crowdfunding campaign. Findings from this study can inform future research that seeks to untangle the interdependencies between individual and collective mechanisms underlying crowd phenomena. Fundraisers who could benefit from excessive funds can harness insights from this study to strategize their campaigns. Likewise, crowdfunding platforms can leverage on our findings to predict the extent of overfunding and advise fundraisers accordingly.
Original languageEnglish
JournalMIS Quarterly: Management Information Systems
Publication statusAccepted/In press - 2024


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