Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response

Abstract

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 certication. 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, certication is a form of conventional transparency that ensures the campaign truly benets a charitable purpose. Using an econometric analysis, we investigate the eects of transparency on donations. We study the direction of causality and mechanisms behind work-related updates by conducting experiments. Results from the econometric analysis using over 100,000 campaigns beneting victims of emergencies reveal that both updates and certication have positive eects on donations. Each additional work-related word in an update (operational transparency) increases donations on average by 65 dollars per month, while certification (conventional transparency) raises funds on average by 22 dollars per month. Results from the experiments conrm the direction of causality; posting work- related updates in crowdfunding campaigns increases donations. Two mechanisms explain this eect: donors' enhanced perceptions of eort and perceptions of trust.