This research examines how and why crowdfunding campaigns are influenced by social identity (of the fundraiser as well as the funder). We argue that funders use crowdfunding as a way to signal their affiliation with politically aligned social groups. In three sequential experiments, we show that the LGBTQ-run enterprises are seen as having higher venture legitimacy, which leads to greater crowdfunding success. This relationship is moderated by the political ideology of the funders, such that liberal funders perceive LGBTQ-run ventures to have higher legitimacy, whereas conservatives do not. We theorise that the appetite for pro-social actions among funders is finite and when depleted does not contribute to their perceptions of identity-linked venture legitimacy. In other words, as liberal funders assess enterprises with inherent pro-social narratives, their need for signaling social group affiliation is fulfilled, depleting their appetite for pro-social choices linked with the entrepreneur’s identity. We show evidence for this account and rule out some alternative explanations in our studies. Our study thus contributes directly to the literature on crowdfunding, adds to the literature on social identity theory, and provides insights to entrepreneurs regarding the effect of founder’s identity on fundraising.
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