After successful fundraising: how overfunding and category spanning affect the release and audience-perceived quality of crowdfunded products

Overfunding of crowdfunded product-development projects would seem to be a welcome outcome for entrepreneurs, yet initial theory and evidence suggest that overfunding can have both positive and negative consequences. To overcome these contradictory predictions, we develop theory linking research on slack resources, audience expectations, and product category spanning to hypothesize boundary conditions for whether and when overfunding has a positive or negative effect on the product-development outcomes of product release and audience-perceived product quality. Post-crowdfunding data on video-game development projects show that entrepreneurs with high-category-spanning products benefit substantially less from overfunding than entrepreneurs with low-category-spanning products. Our study provides novel insights into the relation between overfunding and product release as well as audience-perceived product quality. It also contributes to our emerging understanding of the role of categories in the context of crowdfunding. We discuss implications for theory and practice. Plain English Summary For entrepreneurs receiving more funding than sought in a crowdfunding campaign would seem to be a welcome outcome. However, prior studies have shown that such overfunding can have both positive and negative effects on subsequent product-development outcomes. To shed light on when the effects of overfunding are predominantly positive and when are they predominantly negative, we derive theory on how a product’s category spanning—that is, the positioning of a product in multiple product categories—may impact the effect of overfunding; specifically, on the probability that a product is released and on audience perceptions of the product’s quality. We test these predictions with data from video-game product-development projects crowdfunded on Kickstarter. Our results show that for products with low category spanning, overfunding can be beneficial in terms of both product release and audience perceptions of quality, while high overfunding for products with high category spanning can have detrimental effects for audience perceptions of quality.