Crowdfunding as a Market-Fostering Gift System

Abstract

AbstractReward-based crowdfunding has enabled an unprecedented number of consumers to provision capital for commercial and artistic ventures. Each year, consumers use digital platforms to transfer billions of dollars to entrepreneurs and artists to help them develop a wide range of market innovations. Notably, these consumers obtain no financial benefits, no formal guarantee that their money will be used aptly, and no reimbursement options. Under such materially unfavorable conditions, why do consumers transfer their money to these producers? The present research answers this question by introducing the concept of a “market-fostering gift system”: a social contract that entices consumers to fund the creation and enhancement of market offerings by mobilizing the logic and practices of gift-giving. This conceptualization includes the core stakeholders, processes, outcomes, and shortcomings of reward-based crowdfunding, providing theoretical structure to this consequential articulation of platform capitalism. In addition, this conceptualization advances theory about how gift and market economies intersect. Whereas previous research emphasizes the tensions that characterize their interface, this article brings to the fore the complementary, scalable relationship between gift-giving and market exchange.