Thursday, 28 April 2016

Secret admirers: when crowd-funders hide information

A piece of research that recently caught our eye is "Secret Admirers: An Empirical Examination of Information Hiding and Contribution Dynamics in Online Crowdfunding", authored by US-based scholars Gordon Burtch, Anindya Ghose and Sunil Wattal.  Their work, which you can access via SSRN here, is not directed at intellectual property and innovation-based crowd-funding and none of the usual IP buzzwords jump off the page at you.  However, their work has no little relevance to the use of crowd-funding to launch startups and boost small IP-based businesses that have no alternative (or no easier) access to capital.  According to the abstract of this 45 page piece:
Individuals’ actions in online social contexts are growing increasingly visible and traceable. Many online platforms account for this by providing users with granular control over when and how their identity or actions are made visible to peers. However, little work has sought to understand the effect that a user’s decision to conceal information might have on observing peers, who are likely to refer to that information when deciding on their own actions.  
We leverage a unique impression-level dataset from one of the world's largest online crowdfunding platforms, where contributors are given the option to conceal their username or contribution amount from public display, with each transaction. We demonstrate that when campaign contributors elect to conceal information, it has a negative influence on subsequent visitors’ likelihood of conversion, as well as on their average contributions, conditional on conversion. Moreover, we argue that social norms are an important driver of information concealment, providing evidence of peer influence in the decision to conceal.  
We discuss the implications of our results for the provision of online information hiding mechanisms, as well as the design of crowdfunding platforms and electronic markets more generally.
A previous Aistemos blogpost, "Tops and bottoms are fine, but what about the middle?" (here) made reference to crowd-funding for IP-based ventures, but that was more in relation to their ability to attract cash and publicity rather than with regard to their status as bearers of potentially valuable and commercially sensitive data. 

From Burtch, Ghose and Wattal's piece it seems plausible to suggest that analysis of available data supplied by financial backers might pay dividends.  For example, might the fact that a contributor of funds has its own portfolio of patents lead one to ask whether the decision to fund was based on ulterior motives rather than simply the prospect of making a profit?  Likewise, might the presence on the list of crowd-funders of a large and litigation-friendly investor provide a disincentive to anyone thinking of challenging the validity of the funded business's patents?  

At this stage we can do little more than speculate about the practical utility of investor data, its potential uses and the significance of its absence. There does not yet appear to be a literature on the subject. We will however be keeping watch in the event of any developments and will report them if and when they occur.

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