Legitimacy of Crowdfunding: How Legitimacy Influences Performance of Crowdfunding Campaigns for Video Games

Legitimacy of Crowdfunding: How Legitimacy Influences Performance of Crowdfunding Campaigns for Video Games

Jiyoung Cha (San Francisco State University, San Francisco, USA)
Copyright: © 2019 |Pages: 17
DOI: 10.4018/JMME.2019070103

Abstract

The inherent characteristics of entrepreneurs and video games render it challenging to establish the legitimacy of crowdfunding projects for video games. This study identifies actors of legitimacy of crowdfunding projects and examines how those actors of legitimacy influence performance of crowdfunding campaigns for video games. To address this, this study analyzed 429 crowdfunding campaigns launched to develop video games. The results indicate that the legitimacy established by the entrepreneur and the product is more important than the legitimacy established by third parties.
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Crowdfunding For Video Games In The United States

Video games constitute one of the popular product categories on crowdfunding platforms based in the United States (U.S.) (Gaudiosi, 2015). Both equity-based and reward-based crowdfunding are used for video game projects in the U.S. With respect to the relationship between entrepreneurs and backers, equity-based crowdfunding is similar to traditional venture capitalism in that backers are considered investors, because backers seek equity as a return on supporting a project (Frydrych et al., 2014). By contrast, backers of reward-based crowdfunding do not receive equity as do traditional investors (Gaudiosi, 2015) or backers of equity-based crowdfunding. In reward-based crowdfunding, backers are often considered early audiences or co-creators rather than funders (Frydrych et al., 2014).

Equity-based crowdfunding sites, such as Fig, are still nascent in the U.S. video game industry. In contrast, non-equity crowdfunding has been widely used for game projects in the U.S. (Nucciarelli et al., 2017). In 2016, more than 2,500 video game projects succeeded in achieving their target capital goals on Kickstarter, a reward-based crowdfunding site (Hall, 2017). Given the dominance of reward-based crowdfunding in the video game sector, the present study focuses on reward-based crowdfunding.

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