The Phenomenon of Project Overfunding on Online Crowdfunding Platforms – Analyzing the Drivers of Overfunding

On online crowdfunding platforms, three stakeholder groups, i.e., platform operators, project founders, and funders, encounter each other and influence funding outcomes by their actions and behaviors. Interestingly, among the successfully funded projects, some projects are heavily overfunded. By our research paper, we address this phenomenon of project overfunding. Especially in reward-based crowdfunding, massive overfunding can lead to severe problems for project founders when vast amounts of rewards have to be delivered. Some people even argue that the amount of money that leads to overfunding should better be pledged to good but undervalued projects that fail to reach their funding goal. However, it is also a powerful mean to generate publicity and to sell products. In order to help understanding this phenomenon, we analyze its drivers. Our analysis gives evidence for all three stakeholder groups contributing to overfunding. We provide arguments for all three stakeholder groups to have certain egoistic incentives for a further backing of already funded projects instead of prioritizing a more demand-oriented distribution of funding. Our findings extend the understanding of funding processes on crowdfunding platforms and are of high interest for practitioners in the field