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Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response
Author(s) -
Mejia Jorge,
Urrea Gloria,
PedrazaMartinez Alfonso J.
Publication year - 2019
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.13014
Subject(s) - transparency (behavior) , certification , work (physics) , business , econometric analysis , accounting , proxy (statistics) , causality (physics) , marketing , economics , computer science , computer security , econometrics , management , mechanical engineering , physics , quantum mechanics , machine learning , engineering
Online crowdfunding has emerged as a powerful tool to raise funds for emergency response. Crowdfunding campaigns can use two transparency tools to attract donors: updates and certification. Updates are additional messages that the organizer issues after launching the campaign and are a form of operational transparency when they communicate the campaign’s work to donors. Alternatively, certification is a form of conventional transparency that ensures the campaign truly benefits a charitable purpose. Using an econometric analysis, we investigate the effects of transparency on donations. We study the direction of causality and mechanisms behind work‐related updates by conducting an experiment. Results from the econometric analysis using over 100,000 campaigns benefiting victims of emergencies reveal that both updates and certification have positive effects on donations. Each additional work‐related word in an update (operational transparency) increases donations on average by $65 per month, while certification (conventional transparency) raises funds on average by $22 per month. Results from the experiment confirm the direction of causality; posting work‐related updates in crowdfunding campaigns increases donations. Two mechanisms explain this effect: donors’ enhanced perceptions of effort and perceptions of trust.