Mitigating a crisis of confidence: The effect of crisis response strategies on reward‐based crowdfunding success

Abstract Research Summary This research develops and tests an empirical model for crisis management in reward‐based crowdfunding. Drawing from the SCCT literature, we identify which crisis response strategy best mitigates a crisis of confidence that arises when backers publicly criticize a reward‐based crowdfunding campaign during the live funding period. The results of our experimental study show that by using a rebuild response strategy (i.e., offering compensation, apologizing, and taking responsibility), founders can mitigate the impact of the crisis of confidence on potential backers' funding intentions. Our study also unravels the underlying mechanisms driving this effect: affective and cognitive perceptions of the product and the founder fully mediate the effect of founders' response strategies on potential backers' funding intentions. Managerial Summary This study investigates crisis management strategies in reward‐based crowdfunding. Specifically, we compare the effectiveness of three different response strategies (rebuild, diminish, deny) that founders can adopt when reacting to a publicly visible, negative comment on their crowdfunding page. We test the effects of these strategies in an experiment among 514 participants. Our results show that using a rebuild strategy works better than a diminish or a deny strategy to increase potential backers' funding intentions, because a rebuild strategy enhances perceived likability and trust, while lowering perceived risk. Since communication strategy is key for the reward‐based crowdfunding campaign's ultimate success, we recommend that crowdfunding campaign founders adopt a strategic plan for their public interaction with backers and use an appropriate response strategy.