Principal-agent problem in technology projects on kickstarter : an exploratory case study

Abstract

I conducted an exploratory research of the little understood principal-agent interaction in a reward-based crowdfunding environment. A broad-stroke exploratory research like this is unavoidably limited in the extent to which any of the findings can be generalised beyond individual cases. I attempt to mitigate this by complementing a netnographic approach with a sentiment analysis classifier programme that I have developed. This holistic approach allowed me to gain deep insight into the mechanisms that allow the principal-agent problem on Kickstarter to be resolved successfully despite lack of rigid legislative regulation. I find that backers on Kickstarter possess sufficient tools to minimise information asymmetry and thus, the principal-agent problem. I further discover that formations of backers are comprised of two distinct groups – a small vocal and a much larger silent one, with the latter adjusting to the opinions of the former in the short term. I also find that the crowdfunding platform plays a limited, yet important role in resolving the principal-agent tensions. Finally, I find evidence that formations of backers that surround Kickstarter projects are fluid in their structure, exhibiting under different conditions features of both communities and publics.