-An Investors’ Perspective of Crowdfunding as a Viable Alternative of Financing for

Startups: Challenges, Opportunities, and Prerequisites of Institutionalizing Crowdfunding

Process in Pakistan

RESEARCH PROPOSAL

Submitted By
Amina Rizwan
L1F16PHAF0016

Supervised By
Prof. Dr. Ather Azim Khan

UCP BUSINESS SCHOOL

FACULTY OF MANAGEMENT STUDIES
UNIVERSITY OF CENTRAL PUNJAB
 Table of Contents
1. INTRODUCTION..............................................................................................................4
1.1 Problem Statement...........................................................................................................7
1.2 Rationale of the Study......................................................................................................9
1.3 Research Gap...................................................................................................................9
1.3.1 Practical Significance..............................................................................................10
1.3.2 Theoretical Significance..........................................................................................10
1.3.3 Contextual Significance..........................................................................................11
1.4 Research Questions........................................................................................................11
1.5 Research Objectives.......................................................................................................11
1.6 Research Hypotheses.....................................................................................................11
2. LITERATURE REVIEW.................................................................................................12
2.1 Technology Awareness and Crowdfunding...................................................................13
2.2 Trust Belief....................................................................................................................15
2.3 Project-Related Factors..................................................................................................17
2.3.1 Network Externalities..............................................................................................17
2.3.2 Perceived Informativeness......................................................................................18
2.4 Fundraiser Related Factors.............................................................................................19
2.4.1 Value Congruence...................................................................................................20
2.4.2 Social Interaction Ties.............................................................................................21
2.5 Funders Related Factors.................................................................................................22
2.5.1 Herding and Crowdfunding.....................................................................................22
2.5.2 Perceived Risk.........................................................................................................23
2.5 Platform-Related Factors...............................................................................................25
2.5.1 BlockChain Technology..........................................................................................25
2.5.2 Perceived Accreditation..........................................................................................27
2.5.3 Structural Assurance................................................................................................27
2.5.4 Third-Party Seal......................................................................................................28
2.6 Investor Intention to Invest............................................................................................30
2.6 Control Variables...........................................................................................................30
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 2.7.1 Theory of Planned Behavior....................................................................................31
2.7.2 Supporting Theory: Technology Acceptance Theory.............................................33
2.8 Research Model..............................................................................................................33
3. RESEARCH METHODOLOGY........................................................................................35
3.1 Research Design.............................................................................................................35
3.2 Nature of the Study........................................................................................................36
3.3 Target Population...........................................................................................................36
3.5. Sample Size...................................................................................................................37
3.3.1 Participants..............................................................................................................37
3.4 Data Sources..................................................................................................................37
3.5 Data Collection Procedure.................................................................................................38
3.7 Sampling Techniques.....................................................................................................38
3.9 Statistical Tool...............................................................................................................39
3.10 Model Specification.....................................................................................................39
3.11Moderated Mediation Equation....................................................................................40
References................................................................................................................................42

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 1. INTRODUCTION
The study purposes to explore the challenges, growth, opportunities, and prerequisites of the
crowdfunding platforms for startups, micro and small enterprises in the Pakistani market. The
study will also focus on factors that can strengthen or tweaked investors’ perception, while
investing in crowdfunding, especially in a developing country like Pakistan. Crowdfunding
(CF) is a platform for individuals and groups to get finance a business from the crowd
(Wahjono, Marina, & Widayat, 2015). Crowdfunding acts as an intermediary working as a
bank.
This method of crowdfunding taps into the combined efforts of many people (family, friends,
individual investors (seed funders, angel investors, venture capitalists, retail investors)
primarily online through crowdfunding and social media platforms. By an open call on
internet the entrepreneurs are allowed by crowdfunding to raise funding (Schwienbacher &
Larralde, 2010). Bypassing traditional financial intermediaries and using online web-based
platforms to connect users of funds with retail funders. Definitions of crowdfunding vary, but
they often include the following key components: (i) raising funds in small amounts, (ii) from
many to many, (iii) using digital technology (Jenik, Lyman, & Nava, 2017).
As a financial intermediary, the crowdfunding platform collects money from the crowd and
distributes it to the project initiator or a business unit that has done a campaign on the
crowdfunding platform via the internet for cultural/social purposes or profit (Barnett, 2013;
Mollick, 2014; Kirby & Worner, 2014).
Crowdfunding is the process of asking the public for donations and seed money that can
subsidize the need for capital for startups (Steinberg & DeMaria, 2012; Tomczak & Brem,
2013), through which entrepreneurs raise financing from a large number of sophisticated
audience utilizing online social media (such as Facebook, Twitter, LinkedIn, and other
specialized blogs). It is an organized collective effort of many non-professional people who
are embedded in trust to finance a venture via the internet (Belleflamme, Omrani, & Peitz,
2015; Schwienbacher & Larralde, 2010. Furthermore, this process is enabled by modern
internet technology, whereas potential investors are asked or requested by the entrepreneurs
for financial assistance through the internet (Steinberg & DeMaria, 2012). Crowdfunding
(also known as “crowd financing”) has appeared to be a popular approach to financing
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startups and small firms in several developed countries including Netherland, France,
Germany, Australia, Canada, Japan, the UK, and the USA (Adhikary & Kutsuna, 2016). This
new form of financial technology emerged in the wake of the 2008 financial meltdown in
response to the increased difficulties faced by small business firms in obtaining funds from
the traditional banking system. Crowdfunding grew substantially across the developed world
in a few years (Adhikary, Kutsuna, & Honda, 2018).
The USA began to implement crowdfunding in the year 2007 and was subsequently followed
by other markets after the 2008 global financial crisis (Kim & Moor, 2017). Crowdfunding
offers an alternative to traditional banking, which has grown rapidly in markets that are driven
by technology, macroeconomic, and regulatory factors (Jenik, Lyman, & Nava, 2017). It is
typically divided into four types namely: Donation-based, Reward-based, Lending-based, and
Equity-based and main participants include crowdfunding platforms, fundraisers, funders, and
investors (Massolution, 2012).
Fundraisers launch a project on the platform and set a target amount. Funders and investors of
crowdfunding projects receive rewards after funding the projects. Thus, crowdfunding enables
value discovery and matching (Drover, Busenitz, Matusik, & Townsend, 2017). Financial
technology in a broader sense can increase financial inclusion because it can reach a
financially vulnerable population. For instance, mobile banking and electronic financial
transactions are considered important ways to promote financial inclusion due to their
accessibility, affordability, and safety (Ouma, Odongo, & Were, 2017). Equally,
crowdfunding platforms can help those who have limited access to finance to raise funds
quickly at an affordable cost.
Recent advancements in Information and Communication Technologies (ICTs) and digital
technologies have led to financial innovations that ease how capital demand meets supply and
thus improve the efficiency of capital markets (Agrawal, Catalini, & Goldfarb, 2014). In all
these financial innovations Crowd Funding (CF) is another form alternative form of financing
for new entrepreneurial projects (Bruton, Ahlstrom, & Si, 2015; Block, Colombo, &
Cumming, 2018). Nevertheless, crowdfunding still can be further enhanced by altering a
certain set of regulations to improve its implementation (Kim & Moor, 2017).

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Startups backed by the business angel, grants, and protected intellectual property rights (via
patents, trademarks, or copyrights) significantly increase success chances (Ralcheva &
Roosenboom, 2016). Investors who are not venture-capitalists but small investors have not the
ability to access the small startups and startups usually find ways to reach the investors
through crowdfunding platforms (Ahlers, Cumming, Günther, & Schweizer, 2015). A reliable
crowdfunding system requires more than willing investors and entrepreneurs. They often need
a stable environment and supporting conditions, such as progressive policies, effective
technical solutions, and adaptable communities. The process involves the idea of a "trust
constellation" that allows both parties to participate (Adhikary, Kutsuna, & Hoda, 2018).
Perceived Trust is defined as “the willingness of a party to be vulnerable to the actions of
another party based on the expectation that the other will perform a particular action important
to the Trust or irrespective of the ability to monitor or control that other party” (Mayer &
Davis, 1999). Trust individually is based on the assumption that the other person would act
reasonably and appropriately to meet the trusting party's standards (Kim & Tadisina, 2007).
To explore the relationships between a platform and its users, general trust (relational) and
precise trust (calculus) can be differentiated as calculus trust and relationship trust (Pee &
Lee, 2016).
There are many successful examples of crowdfunding in Pakistan such as the Edhi
Foundation, one of the biggest NGOs in the country is a perfect example here. Over many
decades, it has relied on the complete voluntary services of people and more than that is one
of the best examples of crowdfunding at a local as well as international level and is ranked
amongst the top 10 crowdfunding platforms in Pakistan. Other than this, there are a few
others. For example, the Transparent Hands Crowdfunding website (the first online
crowdfunding platform in the health sector) providing free surgical treatments to the
underprivileged class; the Care Foundation, which helped reconstruction and rehabilitation
work in the flood-affected areas in 1988. Although without return (donation-based)
crowdfunding exists in Pakistan till 2018 there was not a legal platform to perform services
regarding lending-based crowdfunding. In 2019 February the Securities and Exchange
Commission of Pakistan (SECP) legalized all other types of crowdfunding in Pakistan. For
the live testing of the regulatory sandbox, they approved the first technology-based

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crowdfunding platform in first cohort for testing. The approved platform by SECP will
conduct due diligence for investors so that only appropriate fundraisers, meeting criteria, pitch
their startup through the crowdfunding platform, and raise funds from investors (Reema,
2020).
The primary goal of this research is to look at crowdfunding as a viable way to increase
financing facilities in developing countries like Pakistan as people struggle more, to find
funds for any kind of project or venture. There is a lot of opportunities for local and foreigners
to get involved, whether it’s an investment, reward, or simple donation (Klassman, 2017), and
Pakistan was chosen for several reasons. Initially, Malaysia has the highest rates of financial
insertion among Southeast Asian countries due to policies by using digital media to increase
financial inclusion for everyone (The World Bank, 2017), and this part is yet to be explored in
Pakistan. Secondly, crowdfunding support social entrepreneurs to raise funds and resources
for their projects (Parhankangas & Renko, 2017), which can also help Pakistani startups to
raise money for themselves and others to eliminate poverty. The two best crowdfunding
platforms are Kickstarter and Indiegogo (Epstein, 2018), from where two Pakistani startups
secured funding.
1.1 Problem Statement
Individuals and companies should have access to valuable and accessible financial goods and
services, such as purchases, payments, investments, credit, and insurance, that are delivered
responsibly and sustainably (Kim & Moor, 2017). To meet the needs of young entrepreneurs,
there are banks, microfinance banks, seed funders, angels, and venture capitalists, etc. are
approached (Chandra & Fealey, 2009). Money laundering and non-performing loans plagued
traditional banks and capital markets (Martin & Sunley, 2015; Bogers, et al., 2016). As a
result of the escalating challenges, policymakers and regulators in many countries have
imposed new controls that severely limit access to finance. Especially in developing countries,
people struggle more, to find- funds for any kind of project or venture (Quinn & Woodruff,
2019). In recent years, crowdfunding has arisen as an effective means of obtaining funds for-
profit and nonprofit cases, experimental innovations, technologies, cultural ventures, and
startups that have been unable to obtain funding by conventional approaches such as stock
offerings and bank loans (Moon & Hwang, 2018).

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Crowdfunding platforms are also a part of this recent technological advancement that helps in
raising funds for ventures such as non-profit initiatives, traditional or innovative projects,
experimental innovations, and projects which are not backed by banks or stocks (Wang, Han,
& Davies, 2019). Developing countries are more susceptible to have entrepreneurs struggling
to raise funds or platforms for their start-ups. The perception of investors became stronger to
invest on an online platform during the Covid-19 period as it will mitigate physical meeting
risk and due diligence will be done by platform (Brown, Rocha, & Cowling, 2020).
In Pakistan about 68% of our population is under the age of 30, a significant majority do not
have the skills to enter the job market. Microfinance loans for small ventures and
entrepreneurs are available in Pakistan's banking sector, but they are difficult to obtain (Ujan,
Bhutto, & Ismaili, 2019). Pakistan produces about 25,000 IT graduates per year, according to
the Higher Education Commission, and has the potential to come up with innovative ideas that
may shake the IT industry but access to funding programs is not accessible to everyone.
Pakistan has six online donation-based platforms namely Seed Out, Pink Ribbon, Transparent
Hands, Care Foundation, Door of Awareness, and Citizen Foundation (Abbas, 2017) but all of
them are without returns. It was in February 2019 when SECP legalized all types (including
equity-based) of crowdfunding platforms in Pakistan (Desk, 2020).
There is a continuous interest from both industry and academia in uncovering crowdfunding
success factors and variables so this study will fill the gap by exploring through qualitative
research and analyzing factors through quantitative research that will motivate and build the
trust of investors to invest through online crowdlending and give guidelines to funders,
fundraisers, and platforms to participate in these crowdfunding projects to consider it as a
feasible means of investment tool for entrepreneurial financing in developing countries like
Pakistan as a contrast to conventional alternatives (Islam & Khan, 2019). Many closed-ended
questions probed the non-monetary benefits that these platforms provide to an entrepreneur,
but the researchers focused solely on the purpose of intent of crowdfunding platforms and
their outcomes (Gerber, 2014). However, crowdfunding platforms are quickly gaining
popularity in Pakistan just like around the globe (Khan, 2016). This study will assist aspiring
entrepreneurs who are developing new ideas but are having difficulty obtaining sufficient
resources to realize their vision. It will also address the considerations that may affect an

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investor's view when determining whether or not to participate in a project through
crowdfunding platforms. This study will aim to explore the challenges and opportunities faced
by crowdfunding platforms, regulatory bodies like SECP through primary research by giving
them an opportunity and to minimize the challenges for institutionalizing by providing an
opportunity for a sustainable environment for growth in the Pakistani Context.
1.2 Rationale of the Study
This study will provide insights for startups (fundraisers) to develop good relationships with
funders (investors) by understanding the variables that affect an investor's ability to
participate, as well as guidance for crowdfunding designers to strengthen and perfect platform
functions. Entrepreneurs are increasingly exploiting crowdfunding in Pakistan (Ali & Darko,
2015). Hence, it is important to advance academic research in the crowdfunding field to
inform policy, the industry, and education in the context of Pakistan (Sharma, Khan, &
Devereaux, 2015).
There is not much literature seen in the Pakistani context so this study will be a contribution to
the Pakistani context. Not much primary research is seen in the literature for challenges,
opportunities for institutionalizing crowdfunding especially in the case of Pakistan this
research will be conducted for the first time. Some important factors that can change the
funder perception of investment in crowdfunding like herd behavior of investor in
crowdfunding and blockchain technology used in crowdfunding platform for security will be
discussed in the study as there is not much literature reviewed on these factors in
crowdfunding. Technology awareness will be applied to the study's context as a moderator,
which has been used rarely before because it positively affects user attitudes and subjective
norms by using protective technologies (Dinev & Hu, 2007).
1.3 Research Gap
The youth and entrepreneurial community of Pakistan are budding with new business ideas,
but finding it difficult to launch and develop their ventures due to the lack of insufficient
financing sources (Momani, 2017). Although many business leaders have launched numerous
campaigns to help emerging entrepreneurs in their respective industries but only a small
percentage out of the thousands who apply are successful in securing investors and venture
capitalists for their ventures (Damodaran, 2018). Therefore, this study fills the gap by

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exploring and analyzing factors that motivate trust of investors to invest through online
crowdlending and give guidelines to funders, fundraisers, and platforms to participate in these
crowdfunding campaigns instead of more traditional options as a method of entrepreneurial
finance in developing countries like Pakistan (Islam, and Khan, 2019).
1.3.1 Practical Significance
From a practical viewpoint, this study will provide inputs for crowdfunding fundraisers to
establish a strong relationship with funders, as well as guidance for crowdfunding creators for
improving platform features, allowing entrepreneurs to raise sufficient resources for their
companies and transform them into effective projects. The study may lead to giving
information to startups and investors to participate and the government to legalized more
channels for the growth of startups in Pakistan.
1.3.2 Theoretical Significance
Before the current study, technological awareness was not taken as a moderator. Certain
behavior/attitudes are formed by information and subjective norms. Technology awareness
and its information can also strengthen investor perception (Teo, Manaf, & Choong, 2013).
Technology awareness is a vital element in identifying user behavior when it comes to
personal use of protective technologies. This will suggest that awareness is an incident of
behaviors and intentions in the Theory of Planned Action (TPB) framework. User decision to
use safety technologies is positively influenced by technology awareness (Dinev & Hu, 2007).
This study will analyze the effect of an investor’s investment decisions on a crowdfunding
platform based on his or her technological awareness. The Technology Acceptance Model
will be used to understand the effects of moderating variables, and technology awareness will
improve the perceived ease-of-use and perceived usefulness from an investor's perspective. In
addition to this, two new variables, herding and, blockchain, will also assess the effects of
these new variables on investor’s investment decisions. These new variables have not been
studied much about the crowdfunding platform before this study. The qualitative research
through interviews from SECP experts will also contribute some insights that will guide future
researchers regarding challenges and opportunities for information on the platforms,
especially in developing countries.
1.3.3 Contextual Significance

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This study will aim to find the challenges and opportunities present in Pakistan in
institutionalizing crowdfunding platforms. This is primary research as no prior work has been
done on this topic in Pakistan. Since there is not much literature in the Pakistani context on
crowdfunding investor’s perception, especially among potential investors, this study will be a
valuable contribution in the context of Pakistan.
1.4 Research Questions
To fill the research gap following research questions are designed:
 What are the challenges and opportunities regarding regulatory compliance and
reformations needed to institutionalize crowdfunding in Pakistan based on literature
review and in-depth interviews?
 Is there a mediating effect of trust beliefs (Calculus, Relational) between the
relationship of potential factors and intention to invest?
 Is there the moderating effect of technology awareness between the relationship of
potential factors and trust beliefs (Calculus, Relational)?
1.5 Research Objectives
The study will have the following research objectives:
 Exploring and identifying challenges and opportunities regarding regulatory
compliance and reformations needed to institutionalize crowdfunding in Pakistan
 Analyzing the mediation effect of trust beliefs (Calculus, Relational) between the
potential factors (Project-Related, Platform-Related, Funders and, Fundraisers) and
the investor’s willingness to invest
 Analyzing the moderation effect of technology awareness between the potential
factors (Project-Related, Platform-Related, Funder, and Fundraisers) and the trust
beliefs (Calculus, Relational)
1.6 Research Hypotheses
This study would suggest a research model that includes four subject measures: fundraiser,
funder, project, and platform-related variables. Trust has been characterized into Affective
(Relationship) and Cognitive (Calculus) dimensions to analyze the potential factors with the
moderating effect of technology awareness. The research model that has been proposed is
discussed in [Link] will be the research hypotheses of this study:

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H1: Calculus trust and relational trust mediate the relationship between project-related factors
(network externality, perceived informativeness), fundraisers related factors (value
congruence, social interaction ties), funder related factors (herding, perceived risk) platform
related factors (Blockchain technology, perceived accreditation, structural assurance, third
party seal), and investors’ intension to invest.
H2: Technology awareness moderates the relationship between project-related factors
(network externality, perceived informativeness), fundraisers related factors (value
congruence, Social interaction ties), funder related factors (herding, perceived risk) platform
related factors (blockchain technology, perceived accreditation, structural assurance, third
party seal), and trust beliefs (calculus and relational trust).
H3: Calculus Trust and has a direct relationship with investor’s intention to invest.
H4: Relational Trust has a direct relationship with investor’s intention to invest.
2. LITERATURE REVIEW

Funder’s trust in fundraisers, crowdfunding campaigns, and platforms is imperative to discuss.

There would be fewer funders if there is no confidence, and crowdfunding would be
inefficient as a fundraising mechanism. There is a need to address in the literature and provide
suggestions for implementing an effective regulatory framework in order to recommend
potential research themes about how to create and sustain the confidence of stakeholders in
crowdfunding local context (Kang, Gao, Wang, & Zheng, 2016).
This study has three main objectives. First, to identify the challenges and opportunities for
implementing the crowdfunding platform in the local context. Second by using current
information contextually to identify driving forces that include project-related, platform-
related, and fundraiser-related funder-related for funder investment intentions through trust
that is categorized into calculus and relational dimensions for better understanding of investor
perception (Kehr, Kowatsch, & Wentzel, 2015). Thirdly the technological awareness affects
all potential factors and trust (Jazir & Miralam, 2019).
Individuals or groups of entrepreneurs use crowdfunding to maximize the distribution of
social capital by collecting funds for their projects in the form of donation, reward, debt, or
equity-based from a wide number of crowdfunding channels across the internet without the
use of traditional financial intermediaries (Schwienbacher & Larralde, 2010; Mollick, 2014).
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It can broadly be termed as crowdlending in which ventures seek loans via online pitches. It
offers new startups an environment that is not only exciting but attracts early financing and
non-financial sources (Lin, Chen, & Yang, 2020).
Khavul et al. (2015) and Huang, Chiu, Mo, and Marjerison (2018) explained that in many
developing economies, stringent and onerous banking laws, family or kinship arrangements,
and the lack of global institutions all influenced how unconventional financing (such as
crowdfunding) arose and expanded. Entrepreneurial opportunities through crowdfunding
enhanced the possibilities for innovative goods and services by seeking funding online
(Mollick, 2014) in exchange for donation, reward, peer to peer, and equity lending (Anglin,
Short, & Ketchen, 2020).
A platform base funding is different from traditional entrepreneurial finance as in the case of a
platform it enables to manage a large volume of information for sharing with potential
investors without physical interaction. The regulatory environment for these platforms
through which participants interact may change quickly (both across countries and in an
individual country (Cummings, Rawhouser, & Vismara, 2020). The funding through
platforms enables the new venture to stand out from its peers through uniqueness with the
attainment of organizational legitimacy (Taeuscher & Bouncken, 2020).
2.1 Technology Awareness and Crowdfunding
Crowdfunding platforms are not only a source of obtaining funds but also a mean of
promoting the start-ups through social networking services as well as knowledge exchange
through a funding platform. One of the many reasons why crowdfunding platforms gained
popularity in 2007-08 was due to the development of Web 2.0 technology (Short, Mckenny,
Allison, Ireland, & Ketchen, 2017). Technology and technology awareness (the know-how of
technology) helped online crowdfunding platforms to become popular (Bamberg & Moser,
2007). Despite the fact that many groups of entrepreneurs are using crowdfunding to raise
funds for related technology projects, institutional approaches to such activities are barely
seen in the literature (Ziegler, et al., 2018). Furthermore, there are five stages in the decision-
making process for innovation adoption: understanding, mindset forming, decision, execution,
and validation. Age, gender, colour, level of consciousness, and other qualitative and
quantitative units may be used as moderating variables. Weight, income, and blood count, for

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example, are also factors to consider (Baron & Kenny, 1986). The degree to which a target
audience is aware of innovation and has formed a general understanding of what it means is
described as awareness (Dinev & Hu, 2007). Usage of personal computers, internet media,
email online banking has a significant impact on usage and acceptance of the crowdfunding
process (Islam & Khan, 2019). The technology and technology awareness (the know-how of
technology) helped online crowdfunding platforms to become popular. For developing a
moral norm awareness imperative to develop a moral norm (Bamberg & Moser, 2007). A few
studies on awareness have discovered that it is a significant indicator of behavioral intention
(Charbaji & Mikadashi, 2003; Rehman, Esichaikul, & Kamal, 2012; Wan, Cheung, & Shen,
2012). Omar and Al-Nasrallah (2011) found awareness as an adequate moderator between
their selected factors in their study. Based on the previous literature, Dinev and Hu (2007) and
Abubakar and Ahmad (2013) have suggested a model that used technology awareness as a
moderator between performance expectancy, social impact, commitment expectancy,
facilitating circumstances, and behavioral intentions. Pakistan Advertisers Society (2014)
stated that Pakistani internet-enabled mobile owners use conventional social media apps and
that too at relatively low levels. About 77% of the population in Pakistan owning a
smartphone, but the owners may not know how to access their social media or any other
platform that they can use to gather relevant information. The lack of digital literacy among
the Pakistani population may be a hurdle for the usage and adoption of the crowdfunding
platform as one needs the knowledge of Web 2.0 to understand the workings of the platform
being used, the know-how of how to obtain the relevant data about the fundraiser and the
project, and how to carry out their transactions to the crowdfunding platform (Siddiqui, 2019).
In addition to technology awareness, trust is found to positively influence users’ attitudes
towards new technology adoption (Salloum, Al-Emran, Shaalan, & Tarhini, 2019). According
to studies, investors with no advanced knowledge imitate the investment decisions of these
experts (Goethner, Luettig, & Regner, 2020).
Since technology awareness is rarely addressed in crowdfunding studies and it is important to
discuss how it affects many of the other factors in the research to see what kind of moderating
impact it has on factors like trust in an investor's decision to invest.

2.2 Trust Belief

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Alongside technology as a moderator, this study will also consider trust beliefs (i.e. Calculus
and Relationship Trust) as a mediator and will test its mediating effect on the variables.
The perceived likelihood of earning anticipated returns on investment is heavily influenced by
trust. In crowdfunding, the importance of trust in projects, platforms, and fundraisers has been
well established (Kang, Gao, Wang, & Zheng, 2016; Kim & Tadisina, 2007; Wehnert,
Baccarella, & Beckmann, 2019) and seems to be crucial to fundraising effectiveness (Li, et
al., 2016).
Trust enables crowdfunders to overcome their fears of risk and instability and therefore affects
their decision to financially support a project. As a result, not just for fund-seekers but also for
crowdfunding platforms, gaining crowdfunders' interest in a lending project is strategically a
necessity (Moysidou & Hausberg, 2020).
Trust has been proved to play a mediating role in online purchase intention in various studies
(Hong & Cho, 2011; Pavlov, 2003; Pavlou & Gefen, 2004; Verhagen, Meents, & Tan, 2006).
Trust is described as a party's willingness to be vulnerable to the actions of another entity in
the hope that the other will take a certain action that is essential to the trustor, regardless of the
trustor's ability to track or influence the other party (Mayer, Davis, & Schoorman, 1995).
Morgan and Hunt (1994) described trust as the expectation that the trustee would act in the
best interests of the beneficiary. Consumers' fears of risk and uncertainty can be resolved with
the aid of trust. (McKnight, Choudhury, & Kacmar, 2002). Customers would not send vendors
their personal details, like credit card information, if they do not trust them, because safety
and security issues are major obstacles to the Internet channel (Hoffman, Novak, & Peralta,
1999). In short, trust is the factor that plays a direct role in the customer’s online investment
intention. The mediating role of trust can be explained in the presence of some factors that
may increase an investor’s trust and in turn, can lead to an increased intention to invest (Al-
Dwairi & Kamala, 2009; Oghazi, Karlsson, Hellström, & Hjort, 2018; Strohmaier, Zeng, &
Hafeez, 2019; Moysidou & Hausberg, 2020).
The development of trust in the entrepreneur-investor relationship differs depending on the
entrepreneur's behavior and character. There are two types of trust: one that is founded on
human feelings (affect-based) and another that is based on logic (cognitive-based) (Dai, et al.,
2018). Calculus trust is dependent on an individual’s sense of judgment and rational and

15
gathered knowledge about a service provider (Saparito & Sapienza, 2017), whereas relational
trust is and based on emotions and is increased via social gathering and exchanging (Murray,
et al., 2013; Kang, Gao, Wang, & Zheng, 2016). Categorizing how trust is built and sustained
will help entrepreneurs have a higher success rate for crowd-funding projects (Shankar,
Urban, & Sultan, 2002). Consumer trust can be divided into two categories: general trust and
personal trust (Mayer & Davis, 1999).
According to the Theory of Planned Action (TBP) in addition to original components trust
also play a significant role between respondents' behaviors, subjective norms, and perceived
behavioral and their decision to buy. TPB includes perceptions, subjective norms, perceived
behavioral influence, and intention among respondents (Giampietri, Verneau, & Giudice,
2018).
2.2.1. Technology Awareness and Trust Belief
With the advent of e-commerce, many users find it beneficial for them to use online platforms
to carry out their transactions. The reason why commercial transactions over the virtual
platforms have been increasing is due to the introduction of the factor of “trust” among the
users (Yoon, 2002). However, it is needed to determine what helps the consumer in
developing trust in the e-commerce industry. There is a strong and positive relationship
between technology acceptance and user satisfaction relating to the fact that more technology
aware a person is the higher the satisfaction they can get from their experience while using
that technology (Bayraktaroglu, Kahya, Atay, & Ilhan, 2019). The more a consumer has
technology awareness, the higher the satisfaction they can get while using that technology. In
past literature, trust has shown to either negatively or positively influence a user’s satisfaction
on online platforms causing the user to either never visit or revisit the online platform
respectively (Cenfetelli, Benbasat, & Al-Natour, 2008; Kim, Ferrin, & Rao, 2008). Since
technology awareness can enhance user satisfaction, it is interesting to see the effect of
technology awareness on user’s trust which can then in turn affect the user’s satisfaction.
Similarly, in the case of a crowdfunding platform, technology awareness can enhance user
satisfaction, and trust has the power to influence this satisfaction, hence the technology
acceptance model and theory of planned behavior (TA-TB) relationship can be established as
well.

16
Since the different effects of trust in crowdfunding and e-commerce are significant so this
study considers trust in the project, fundraiser, funder, and platform as key elements
for incentive in crowdfunding contexts.
2.3 Project-Related Factors
These factors relate to the project that an investor might consider a project before deciding on
investing in the said project. Funders will assist the fundraiser in improving and perfecting the
project by investing in it in a variety of ways, which decreases project ambiguity and
encourages relational trust (Kim & Tadisina, 2007) and calculus trust (Kang, Gao, Wang, &
Zheng, 2016). The following project-related factors have taken in this study
2.3.1 Network Externalities
Network externalities occur when the utility of a consumer specifically relies on others' usage.
In their empirical analysis of network externalities and crowdfunding, Ward and
Ramchandaran (2010) argue that the decision of customers to contribute to a project depends
on the performance and failure of a project and the consistency of the knowledge gathered in
the market. “The number of participants, perceived complementarity, and several peers having
significant effects on users' perceived benefits that contribute to continued intention to use,”
according to network externality (Lin & Lu, 2011). In contrast to this, Strader, Ramaswami,
and Houle (2007) concluded that network externalities play little to no role in this decision,
and network externality is highly essential when considering IT acceptance.
It is believed that technology awareness comes more from your social network rather than the
usage. If people around you use a certain technology, there is a huge chance that you will also
start using it. And the more your social circle uses a certain type of technology, the more you
trust that technology. Network externality directly and positively influences technology
acceptance (Wang, Hsu, & Fang, 2005), But this study is dealing with the moderating role of
technology awareness between network externalities and trust beliefs. Network externalities
deal with the number of users a product has and the higher the number of users, the increased
the utility of consumption. Technology awareness of the investor may not have any role in the
increasing number of investors in a project. Hence this study finds no evidence of technology
awareness having a moderating role between network externalities and trust beliefs.

17
There is a high degree of network externality, which leads to a high level of calculus and
relational trust, which boosts investment intentions (Kang, Gao, Wang, & Zheng, 2016). The
various studies also found that CF promotes the formation of networks, communities, and
trustworthy bonds, implying that CF facilitates the growth of social capital (Kang, Gao,
Wang, & Zheng, 2016; Madrazo-Lemarroy, Barajas-Portas, & Tova, 2019); as well as
allowing fund-seekers to use word-of-mouth references and promotion to tap into their
crowdfunders' networks (Brown, Boon, & Pitt, 2017). Based on arguments above, the study
proposes the following hypothesis
H1a: The relationship between network externality and the willingness to invest is mediated by
calculus trust.
H1b: The relationship between network externality and the willingness to invest is mediated by
relational trust.
2.3.2 Perceived Informativeness
The ability to deliver important information to the target clients is referred to as perceived
informativeness. Consumers who have a low level of trust in online sites want
informativeness to minimise confusion (Kim, Kim, & Park, 2010). Informativeness has a
significant influence on adopter activity among social media users (Chiang, 2013).
Kang, Gao, Wang, Lin, and Wang (2016) concluded in their study that calculus and relational
trust play a direct mediating role in the perceived informativeness of the consumer, therefore,
affecting the customer’s willingness to invest. Furthermore, the more insightful a fundraiser
is, the more calculus and relationship confidence the funder will feel, and the more likely they
will participate in a crowdfunding project (Kang, Gao, Wang, & Zheng, 2016). Therefore, the
study proposes the following hypothesis:
H1c: The relationship between informativeness and willingness to invest is mediated by
calculus trust.
H1d: The relationship between informativeness and willingness to invest is mediated by
relational trust
Perceived informativeness usually depends on how well the information is presented. Many
project-makers can upload videos, prepare power points, or simply call by the investor to
present the required information or to answer queries of the investor. It is more important to

18
have a well-organized information to increase the perceived ease-of-use rather than other
technological advancements (Gao, 2013).
The majority of customers may be unable to use modern mobile technologies due to a lack of
understanding of smartphones and their applications (Islam & Grönlund, 2011). In some cases
technology, (Jacucci, 2011) it was discovered that awareness played a role in the design of
functionalities such as messaging and media distribution through the internet and
smartphones. Perceived ease of use is a person's assessment of how easy it is to communicate
with a particular information system or technology without exerting mental effort (Davis,
1989). In both the initial and updated TAM models, it is one of the main behavioral beliefs
affecting the consumer intention to accept technologies. So a person with sound ICT
knowledge may be able to access the information present more efficiently as compared to a
person with lesser knowledge of ICTs (Nelson, Jarrahi, & Thomson, 2017). The study
proposes that information present on a website may be accessible to the person who is more
technology aware and proposes following hypotheses
H2a: The relationship between perceived informativeness and calculus trust is moderated by
technology awareness.
H2b: The relationship between perceived informativeness and relational trust is moderated by
technology awareness.
2.4 Fundraiser Related Factors
The fundraiser-related factors are those which are entrepreneur’s attributes that can influence
the investor perception is following (Crescenzo & Soriano, 2020). Following are fundraiser
related factors
2.4.1 Value Congruence
The degree to which the funder's and fundraiser's ideals align in order to achieve common
goals is known as value congruence (Burke, Sims, Lazzara, & Salas, 2007). Related beliefs,
cultures, races, and perspectives can result in value congruence. McKnight and Chervany
(2001) found that people had specific opinions in specific traits (such as capability,
benevolence, and integrity), rather than just being trustworthy or not. A sense of mutual
commonality with the other group fosters trust. The degree to which a customer's perceptions
of an e-commerce company's ideals congruent with his or her own values, causes, and vision

19
of society. The degree of trust in an organization is affected by value perception of an
individual in an organization (Cazier, Shao, & Louis, 2006).
Bruke and Heiland (2007) gave a significant relationship between calculus trust and value
congruence but the research conducted by Kang, Gao, Wang, Lin, and Wang (2016)
concluded that value congruence directly has no significant relation with investor’s
willingness to invest but it requires calculus as a mediator to be able to have a noteworthy
effect on investor’s intention to invest.
This can be because having similar values may not mean much in the long run to an investor
or the fundraiser but it helps in developing a little extra trust between the two parties, based on
the above arguments, the study hypothesizes that
H1e: The relationship between value congruence and willingness to invest is mediated by
calculus trust.
H1f: The relationship between value congruence and willingness to invest is mediated by
relational trust.
Value congruence may only impact investor’s intention to invest only with the mediation of
trust but that relationship may be enhanced by technology awareness. The ability to use
electronic services that can be stimulated by sound users’ attributes (such as ICT skills) seems
important for informed Information Systems (IS) success (Zang, Wang, & Duan, 2016). When
technical knowledge is associated with a particular task, such as product evaluation,
determining environmental damage, programming a computer, tuning a violin, or plucking
poultry, it is more clearly specified (Herschbach, 1995).
Socio-technical congruence aims to reduce the number of differences, either by preserving
good cooperation between individuals who used to observe the connection between the
technical dimension of work and the interpersonal interactions between team members or by
maintaining good coordination between individuals who used to observe the alignment
between the technical dimension of work and the social relationships between team members.
It has been proved that high socio-technical congruence is an indicator of teamwork
performance. Based on the logistical dependencies on the project, a communication need
means that two persons should coordinate (Kwan, Schroeter, & Damian, 2011). A person with
sound knowledge of ICT has the ability to look up more about the fundraiser like his or hert

20
past work, his or her personal attributes (via social media), etc, thus increasing the knowledge
about value similarity between the investor and the fundraiser. Based upon the above
arguments our study proposes following hypothesis
H2c: The relationship between value congruence and calculus trust is moderated by technology
awareness.
H2d: The relationship between value congruence and relational trust is moderated by
technology awareness.
2.4.2 Social Interaction Ties
The networks by which knowledge and resources flow are referred to as social interaction ties.
It's a combination of amount of time spared, the complexity of the relationship, and the extent
to which participants communicate (Lu & Lin, 2011). Social behavior on social networking
sites is often influenced by familiarity with other users (Kim, Lee, & Bonn, 2017).
Crowdfunding platforms allow the individuals (investors and entrepreneurs) to interact with
each other hence allowing relation trust to be built. It is also shown that the investment
decision is made stronger when relational trust is present (Kim & Moor, 2017). Social
interaction ties are a predictor of fundraiser traits that have a significant impact on social
media trust (Lin & Lu, 2011) as well as improving the perception of confidence in virtual
societies (Hsiao & Chiou, 2012). By keeping in view of earlier research the study purposes
that
H1g: The relationship between social interaction ties and the willingness to invest is mediated
by relational trust.
Social Interaction Ties mainly deals with the amount an investor spends interacting with the
fundraiser. When we consider this, the time spent on the interaction deals directly with the
personality of the user. People with high extraversion feel more attached with interacting
(Kuo & Tang, 2014). Technology awareness does not affect one’s personality hence no
relationship is found between technology awareness, social interaction ties, and trust beliefs.
2.5 Funders Related Factors
Funders invest in CF platforms because they want to help the founder and their cause (Gerber
2014). Following are funders related factors
2.5.1 Herding and Crowdfunding

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As compared to conventional financing, crowdfunding backers are typically considered less
sophisticated than traditional investors, and there are greater knowledge asymmetries between
startups and investors/lenders. As a consequence, when opposed to other modes of
fundraising, crowdfunding is unique, and signals are critical for investors (Ahlers, Cumming,
Günther, & Schweizer, 2015; Courtney, Dutta, & Li, 2017).
Ahlers et al. (2015) found that for getting credible signals, crowd/investors perceive several
cues that can increase the probability of a successful fund. The crowd uses cognitive shortcuts
for observing the behavior of others to guide decision making (Bikhchandani, Hirshleifer, &
Welch, 1992), which is called herding behavior that follows the decision of others and is
expected more reliable information. Individuals overcome these uncertainties by imitating
others (Rao, Greve, & Davis, 2001). To resolve the knowledge asymmetries, it is presumed
that a higher level of trust is needed. Various trends among crowd investors, including a social
phenomenon known as herding behavior, have been recorded in a growing body of literature
(Agrawal et al. 2014; Bikhchandani et al. 1992).
Investors who have been through a financial crisis are more likely to herd and lend larger
sums to loan borrowers who have earned high ratings from other creditors. Previous
researchers have identified several variables that influence crowdfunding engagement,
including social capital (Giudici, Guerini, & Lamastra, 2013) and the herding effect among
consumers. (Herzenstein, Dholakia, & Andrews, 2011) investigated that how crowd investors
respond when one of their peers makes an investment decision. Social capital and early
financial contribution induce herding behavior because they provide a sign of credibility and
trustworthiness. (Skirnevskiy, Bendig, & Brettel, 2017; Zhang & Liu, 2012).
Other researchers documented the generic and strategic herding behavior in their analyses of
personal investment choices (Herzenstein, Dholakia, & Andrews, 2011) , and since a high
level of participation from supporters is needed so trust is assumed to play a significant role
(Vismara, 2018) , so the study purposes following hypotheses:
H1h: The relationship between herding and investor intention to participate in crowdfunding is
mediated by calculus trust.
H1i: The relationship between herding and investor intention to participate in crowdfunding is
mediated by relational trust.

22
Moreover, Self-awareness (private and public self-awareness) and Context-Awareness
(perceived expertise, similarity, and familiarity) influence herd behavior (Chen & Davison,
2019). But no relationship was found when looking for the role of technology awareness in
herding. The reason for this can be that herding is a social phenomenon that is induced by
social culture and peer-pressure. Technology awareness plays no such role in influencing
herding behavior.
2.5.2 Perceived Risk
Customers' predicted unfavorable results from purchasing a commodity, or their objective
estimation of losses associated with obtaining the product are referred to as perceived risks
(Hong & Cha, 2013).
Perceived risks can be described as "the possibility for failure in the pursuit of the desired
outcome of using an e-service," according to the definition (Featherman & Pavlou, 2003). One
of the study's underlying assumptions is that different people view risk differently and that
customers in different societies may have different ideas about what daunt them from buying
online (Ko, Shim, Jung, & Kim, 2004).
The perceived risk construct has been captured by the use of different scales (Featherman &
Pavlou, 2003), which define the basic contents or forms of perceived risks, according to the
related literature (Zhang et al. 2012). Perceived risk (i.e. psychological, financial, and Internet
payment risk) was found to reduce shoppers' purchases by using online channels (Hong &
Cha, 2013), and purchase transactions using mobile devices. Following the studies of Bauer,
(1969), Featherman & Pavlou (2003), Bhukya & Singh (2015), and Yang, Zhao, & Shiu
(2019) categorized risk into financial risk, functional risk, physical risk, psychological risk,
time risk, social risk, and privacy risk which can lead negative impact in decision-making and
reason of an inaccurate decision that is likely to adversely impact their confidence in a project.
Essentially, the consumer's preference for a product, brand, manufacturer, or channel
determines the essence of perceived risks (Hong & Cha, 2013).
Financial risk leads to financial loss as a result of the project's poor production. The project's
work did not exceed investors' standards, or it was worse than that of their rivals, according to
functional risk. The time risk is defined as the amount of time wasted during the project's
execution, operation, and modification, while the physical risk was defined as the project's

23
impact on investors' health and welfare. Affective injuries suffered by investors as a result of
poor decisions were often considered a psychological risk. Social risk as the negative impact
on social contact caused by poor decisions (Yang, Zhao, & Shiu, 2019).
These risks were discovered to be linked to transaction processing and monetary threats rather
than protection and privacy concerns (Gross, 2016). The perception of risk in crowdfunding is
strongly linked to funding intention (Zhao, Chen, Wang, & Chen, 2017). Furthermore, the risk
attitude of crowdfunders was found to affect crowdfunding results, with less risk-averse
crowdfunders having greater incentives to invest (Zhu, Wang, Zhu, Zhou, & Wang, 2016) .
As a result, perceived risk was discovered to have a significant and detrimental impact on
Internet loyalty (Hsieh & Tsao, 2014; Zhao, Chen, Wang, & Chen, 2017; Hong & Cha, 2013;
Angerer, Niemand, & Kraus, 2018). Mayer, Davis, and Schoorman (1995) established risk-
taking in transactions argued that “one does not need to risk anything in order to trust; rather,
one must take a risk to participate in trusting action.” Kim, Ferrin, and Rao (2008) identified
the impact of Internet consumers’ trust and perceived risk on their purchasing decisions by
combining the perceived risk and trust.
Consumer intention to use mobile payment (m-payment) was mediated by trust. Market
decision to use m-payments has a negative association with perceived risk and confidence.
(Park, Amendah, Lee, & Hyun, 2019). The potential uncertainties of a crowdfunding project
may have a negative impact on an investor's interest in the project. The fundamental
mechanisms that improve crowdfunding intentions are trust and dedication (Yang, Zhao, &
Shiu, 2019). Based on the above arguments the study purposes following hypotheses:
H1j: The relationship between perceived risk and investor’s intention to invest is mediated by
calculus trust.
H1k: The relationship between perceived risk and investor’s intention to invest is mediated by
relational trust.
There are mixed findings of the relationship between trust and perceived risk. According to
some scholars, the relationship is parallel (Das & Teng, 2004), while some suggest its serial
(Pavlov, 2003). Others suggest that it is negligible (Kim & Prabhakar, 2000). These conflict
findings allow us to suggest a moderating relationship with regards to perceived risk and trust
to understand the mediating role of trust in the relationship between perceived risk and

24
investor intention to purchase. Technology awareness can be looked at as how the technology
works. Previous studies by (Mutahar, Daud, & Ramayah, 2018; Hanafizadeh &
Khedmatgozar, 2012) have shown that perceived risk reduces technology acceptance because
it reduces perceived ease-of-use and perceived usefulness. Another study by Corbitt,
Thanasankit, and Yi (2003) explained that consumers' risk perceptions should take into
account social, efficiency, psychological, and time risk, as well as financial risk, but that
protection, privacy, and reliability concerns should be seen as technology trustworthiness. In
the concept model of e-trust for e-banking, Yousafzai, Pallister, and Foxall (2003) addressed
economic, personal, functional, and privacy vulnerability linked to transaction-specific
uncertainty. Based on the above researches this study will discuss the effect of perceived risk
on trust in the presence of technology awareness purposes following hypotheses:
H2e: The relationship between perceived risk and relational trust is moderated by technology
awareness.
H2f: The relationship between perceived risk and calculus trust is moderated by technology
awareness.
2.5 Platform-Related Factors
Platform-related factors relate to the factors of the platform that one might consider when
using a Crowdfunding platform for investing in a crowdfunding project (Kaartemo, 2017).
2.5.1 BlockChain Technology
Blockchain technology is a decentralized and distributed ledger system that ensures
blockchain confidentiality, security, and transparency that cannot be forged or tampered with,
and is considered to have potential in the financial sector (Mehrwald, Treffers, & Titze, 2019).
It is a secure, reliable, and low-cost method for registering crowdfunding stocks and shares; it
simplifies the transaction and distribution of crowdfunding equities by facilitating their
circulation; and it enables entrepreneurs and investors for peer-to-peer exchanges (Zhu &
Zhou, 2016; Arslanian & Fischer, 2019).
One of the major barriers that is faced during the adoption of blockchain technology is a lack
of knowledge about it which occurs due to the lack of awareness of the technology usage
(Sadhya & Sadhya, 2018). The lack of technology awareness can generate a lack of trust when
using a platform that is blockchain-enabled as the user will not understand the mechanics of

25
the blockchain and will feel hesitant when using the platform (Sadhya & Sadhya, 2018). The
variable was coined as "awareness of consequences" by Zhang, Wan, Cheung, and Shen
(2012), who studied its impact on behavioral intention. In the Nigerian retail industry
(Abubakar & Ahmad, 2013), there is a moderating effect of technology awareness on the
relationship between constructs (performance expectancy, effort expectancy, social influence,
and facilitating conditions) and behavioral intention to use systems. This shows that the more
technology aware an individual is, the more trust they would have while working on a
platform that is blockchain enabled. The impact of blockchain technology on antecedents of
trust in the platform (institution-based trust) is moderated by blockchain technology
familiarity (Zhu & Zhou, 2016).
In the light of above argument the study purposes following hypotheses:
H2g: The relationship between blockchain technology and relational trust is moderated by
technology awareness.
H2h: The relationship between blockchain technology and calculus trust is moderated by
technology awareness.
In certain financial fields, but not all, the trust feature inherent in blockchain allows it to
eradicate the need for intermediaries (Cai, 2018). Trust-regulated and trust-free networks, as
well as systems based on Blockchain Technology (BCT), are currently generating the most
buzz. They have data storage, accountability, and anti-forgery and anti-tampering
functionality. It assists a forum in gaining public interest and establishing credibility as a
third-party entity. Documents may be stored in blockchain to retain the confidentiality of fund
management during fundraising. Following the fundraising, blockchain immediately registers
investors as owners. Investors are given proof that they own shares in the company, which
resolves the issue of fund protection and regulatory enforcement (Pu, Ge, Yan-Feng, & Yu-
Bin, 2016).
Based on the above literature the blockchain can eliminate risks associated with money
management from a regulatory point of view and have a good perspective on crowdfunding
specially equity crowdfunding. Because of its strong potential of blockchain technology
influence the trust in transactions online, the role of blockchain technology in trust building

26
needs to be included in current trust concepts (Mehrwald, Treffers, & Titze, 2019). From all
the above arguments the following hypotheses are developed:
H1l: The relationship between blockchain technology and the investor's intention to invest is
mediated by calculus trust.
H1m: The relationship between blockchain technology and investor intention to invest is
mediated by relational trust.
2.5.2 Perceived Accreditation
Perceived accreditations are attempts made to guarantee and validate that a project's capital is
sufficient and that the fundraiser is capable of performing as intended (Pavlou & Chai, 2002).
The factor shows how well the platform takes care of its screening process to deliver the best
projects on the crowdfunding platform. According to Kang, Gao, Wang, and Zhang (2016),
funders' calculus confidence and intention to spend increases as they expect greater
accreditation. This leads to the following hypothesis:
H1n: The relationship between perceived accreditation and the investor intention to invest is
mediated by calculus trust.
Accreditation relates more to the fact that you trust the websites to allow only the best and
honest projects to present on their platform so that the investor’s risk of fraud is minimized.
No literature was found that links perceived accreditation to technology awareness. Hence this
study deduces no moderating role of technology awareness is present between perceived
accreditation and trust beliefs.
2.5.3 Structural Assurance
It refers to the assumption that the platform has protective legal or technical mechanisms in
place to ensure that crowdfunding is protected and secured (Bock, Lee, Kuan, & Kim, 2012).
This factor may increase the perceived trust of an investor in a crowdfunding platform and
thus increase the willingness of the investor to invest but a study by Kang, Gao, Wang, &
Zheng (2016) concluded that the funder will invest if structural assurance increases the level
of trust to exceed the perceived risk threshold. However, there is a need to understand that
why both calculus and relational trust may enhance the relationship between structural
assurance and investor intention to invest. Calculus trust is conditional and is associated with
the profitability of a decision. When investing in a platform that gives structural assurance, the

27
investor believes that this decision will give him economic profit by taking care of his funds
and privacy. Relationship trust is more personal and deals with developing relationships
between the two parties. A robotic platform may ease the risk of security but no evidence can
be found on the personal attachment of the user to the platform. Therefore, the study proposes
the following hypothesis:
H1o: The relationship between structural assurance and intention to invest is mediated by
calculus trust.
Structural assurance relates to knowing the workings of how the platform works and for that
one needs to know how the technology works. And in order to know how technology works,
one needs to be technology aware. Literature has shown that being technology aware certainly
plays a role in creating trust over structural assurance.
The statistical findings of an Afshan and Sharif (2016) concluded that there is a significant
relationship between Task Technology Fit (TTF), Initial Trust (IT), and Facilitating Condition
(FC), and m-banking adoption. Therefore, the study purposes
H2i: The relationship between structural assurance and calculus trust is moderated by
technology awareness.
2.5.4 Third-Party Seal
Building confidence in the e-commerce sector is extremely difficult where the interactions are
more robotic and no personal connection is made with the online vendor. A study by Head
and Hassanein (2002) concluded that a website with a stamp of approval from a credible
source (e.g., a federal entity, a bank, etc.) has a favorable impact on consumer purchasing
intent. This shows that online businesses initially face a lack of trust from the consumer due to
having no seal-of-approval from a third party. Third-party seals usually refer to the
verification of the online retailer by an independent party (Özpolat, Gao, Jank, &
Viswanathan, 2013). Examples of third-party seals are TRUST-e and BBBonline; they use a
stamp to certify that such procedures or regulations in an e-commerce website are intact
(Cazier, Shao, & Louis, 2006).
In terms of crowdfunding, the retailer, website, or platform is considered the website where
transaction of information and funds will take place. This platform needs to be verified as
both the entrepreneur and the investor have a lot to lose if the platform turns out to be fake or

28
unreliable. Kang, Gao, Wang, & Zheng (2016) have concluded in their study that third-party
seals significantly affect the calculus and relationship trust to develop the investor’s intention
to invest. The process of getting a third-party seal is fairly easy. Various websites collect and
make an aggregate of customer’s feedback regarding their experience of various platforms to
determine the overall ratings of the respective platforms. This allows the customers to look at
the overall ratings rather than go through all the individual reviews of the customers to
determine the trustworthiness of the online platform (Cook & Luo, 2003).
A third-party seal decreases funders' concerns by establishing and enforcing straightforward
laws, as well as increasing funders' calculus confidence. If funders continue to believe this,
relational trust in fundraisers can be achieved by intensive engagement (See & Ho, 2014;
Kang, Gao, Wang, & Zheng, 2016).
From these arguments the following hypotheses are developed, which will be tested:
H1p: The relationship between a third-party seal and intention to invest is mediated by calculus
trust.
H1q: The relationship between a third-party seal and intention to invest is mediated by
relational trust.
To trust a third-party seal, one needs to know how to access those third-party seals.
Setting up and maintaining crowdfunding projects or initiatives, as well as taking funds, the
use of a third-party technology platform or website will be required. In contrast to previous
research, Kimery and McCord (2002) found that the privacy assurance seal has a substantial
but positive effect on customer trust in a new e-retailer. There is a requirement of having the
knowledge of web 2.0 and how to access the websites that offer these types of seals. In
addition to this, Cook and Luo (2003) also said that not all third-party seals can be trusted so
one also has to take into consideration what websites to trust and what websites offer the best
information and one can only do that if one is aware of how to use technology. Before and
after the educational intervention, there is a connection between consumers' views of online
security, including WASS knowledge, value of WASS, privacy issues, security concerns, and
information quality. User knowledge of the web's protection and privacy risks, as well as the
position of web assurance seals, will increase awareness. Particularly after the intervention,
there is little correlation between these assurance seals and an e-commerce site's

29
trustworthiness and concern about privacy issues and perceived content quality (Kim,
Steinfield, & Lai, 2008).
From the above arguments the following two hypotheses are developed:
H2j: The relationship between third-party seal and calculus trust is moderated by technology
awareness.
H2k: The relationship between the third-party seal and relational trust is moderated by
technology awareness.
2.6 Investors’ Intention to Invest
Factors and forces such as attitudes, self-motivation, and other behavior can affect investing
behavior, and these factors can be categorized into personal characteristics, such as
personalities, self-motivation, and other traits (Merikas, Merikas, Vozikis, & Prasad, 2003).
Kamari and Kamari (2012) found that in personal relationships and offline commerce, trust is
a crucial and important issue. Trust can be looked at as a type of social capital in the business
world to establish long-term relationships. There is an enormous potential in the e-commerce
industry and this trust that the e-commerce industry will grow largely has attracted many
investors and merchants to do business online (Strader, Ramaswami, & Houle, 2007). Trust
and security are looked at as the most important barriers that are preventing the growth of the
e-commerce industry (Al-Dwairi & Kamala, 2009). As opposed to this, one of the most
important elements in an electronic environment comes out to be trusted (Pourshahid, et al.,
2008). Various studies have concluded that the ease of use influences the trust developed
using the online platform (Lederer, Maupin, & Sena, 2000).
If an individual has more trust in the crowdfunding platforms, projects, and the fundraiser, he
is more likely to participate in the projects available on that platform. From all previous
studies, the following are hypotheses of the study:
H3: Calculus Trust and has a direct relationship with investor’s intention to invest.
H4: Relational Trust has a direct relationship with investor’s intention to invest.
2.6 Control Variables
Control variables are included to check the validity of the hypothesis under the influence of
some unrelated factors (Kałamała, Szewczyk, Chuderski, Senderecka, & Wodniecka, 2020).
For this study, age from 20-60 (Munim & Shneor, 2020) and type of projects invested in

30
(Bassani, Marinelli, & Vismara, 2019) are taken as control variables as these variables judge
the characteristics of the investor and investment type. Studies suggest that age plays a major
role when deciding on where to invest (Jain & Mandot, 2012). This is because different age
groups have different risk propensity and judgment experiences of various projects. Type of
investment becomes relevant because different investors seek different rewards. Donation-
based crowdfunding is used by people who just want the satisfaction of contribution, equity-
based crowdfunding is opted by people who seek a profit-or-loss relationship, and reward-
based crowdfunding is opted by people who want some sort of reward (Polzin, Toxopeus, &
Stam, 2018). Hence it makes this study easier to differentiate participants based on these two
factors and then derive the results.
2.7 Theory
2.7.1 Theory of Planned Behavior
The degree of investment decision-making is influenced by behavioral finance theory
(Forsterling, 1985). The science of behavioral finance employs cognitive psychology to
explain biased behavior, and the synergy between the two disciplines of financial science and
cognitive psychology will prove that one's behavior can deviate from normative standards
(Sherfin, 2007), and an effort to clarify and understand the investor behavior, which involves
emotional processes and influence on decision-making. Internal factors (abilities, behaviors,
personality, and initiative or action) and external factors (task, others, atmosphere, and chance
or fate) are used in theories of human characteristics to describe the cause of events or
outcomes. Usually, a person is supposed to be able to make appropriate financial decisions
and choices, which include not only risk and return but also the psychological aspect of the
individual as a decision-maker which can lead to irrational behavior and biased decision
making (Paramita, Isbanah, Kusumaningrum, Musdholifah, & Hartono, 2018).
The Theory of Planned Behavior (TPB) an individual’s intentions and behavior buildup
through attitude (knowledge/information), and subjective norms (social pressure), behavioral
intention whereas perceived behavioral control is how easy to perform that task.
The Theory of Planned Behavior (TBP) defines the relationship between trust and perceived
behavioral control. In online transactions, the trust will boost perceived behavioral control.
(Hansen, Saridakis, & Benson, 2018). TPB variables such as trust in investments within

31
components reflect a favorable association between respondents' attitudes, subjective norms,
trust, and perceived behavioral control, and their intention to invest (Giampietri, Verneau, &
Giudice, 2018).
Several researches have shown that trust and perceived behavioral control have a significant
association (George, 2004). When anyone has Trust in a system, he or she can use it if
resources such as an internet network and funds are available. Individuals who make rational,
reasoned choices to engage in particular decision-making by analyzing the evidence available
are part of planned behavior theory (Ajzen, 1991). Specific perceptions are key in making
such investment decisions, according to the hypothesis, which increases the probability of
success and improves results (Ajzen, 1987).
Previous surveys have shown a gap in investing behavior studies in the financial market,
which is worth investigating further. Many scholars have used the Theory of Planned
Behavior (TPB) to study consumer financial behavior for investing (Jang, 2008).
The theory of planned behavior was previously applied to investigate investment decisions
(East, 1993), customer service switching behavior to see the behavior intention (Bansal &
Taylor, 2002), customer actions in completing a debt management plan (Xiao & Wu, 2006)
and in the setting of e-commerce, such as online shopping intentions and buying behavior
(Lim & Dubinsky, 2005; Shim, Easlick, Lotz, & Warrington, 2001; Shih & Fang, 2004) and
discovered that the desire to use the Internet for knowledge search acted as a mediator
between antecedents including attitude, perceived behavior control, and previous experience
and the outcome variable that is online purchasing intention. In addition, Lau et al. (2001),
Gopi and Ramayah (2007), and Lee (2009) use TPB to investigate investors' intentions to
trade electronically and using online banking. TBP factors including attitudes, subjective
norms, and perceived behavior control tested by (Phan & Zhou, 2014; Warsame & Ireri, 2016;
Paramita, Isbanah, Kusumaningrum, Musdholifah, & Hartono, 2018) and identified
significant effects on the behavior of investor interest in the capital market. This shows that
TPB has been used extensively and successfully in the literature to predict financial behavior.
In correlation to the current study, the TPB can potentially influence an investor’s decision.
Such as, an investor’s attitude towards investing in a project that already has a lot of investors
can be strong as he or she might perceive it as a better project to invest in. Similarly, peer’s

32
recommendations, family’s opinion, security, and behavior of others in trading may investors
also form the “Subjective Norm” variable.
In the light of TBP, this study will explain the factors including attitudes (herding and
perceived risk), subjective norms (network externalities, perceived informativeness and value
convergence), social norms (social interaction ties), perceived behavior control (blockchain,
structural assurance, and third party seal) will influence the (calculus and Relational), trust
that will affect the individual intention to participate (investor intention to invest) in a
crowdfunding platform.
2.7.2 Supporting Theory: Technology Acceptance Theory
According to the Technology Acceptance Model (TAM), two factors influence people's
attitudes toward technology: perceived usefulness and ease of use (Fred, 1989). These two
perceived facets have an impact on how internet users access technology, such as
crowdfunding platforms and technological awareness. This strengthens the ease of use and
usefulness as a funder is well aware of the technology more easily he/she can use the platform
(Salloum, Al-Emran, Shaalan, & Tarhini, 2019). In crowdfunding, the assumption that using
the internet forum will assist contributors in supporting efforts is referred to as perceived
usefulness.
From the perspective of a contributor, the more projects a platform has, the more appealing it
seems to be for a project creator to present their project on it (Rochet & Tirole, 2006). As a
result, the platform focuses on a wide segment of the market and can be identified in
crowdfunding platforms. In line with the Technology Acceptance Model (Fred, 1989) and the
Theory of Planned Behavior (Ajzen, 1987), this study argues that how factors (platform,
fundraisers, funders, project-related) with the help of technology awareness, affect the
investors’ trust which in turn will influence his participation to invest in a crowdfunding
campaign.
Both of these theories are relevant in terms of the current study. TPB explains human
behavior in general whereas TAM explains the factors that affect technology acceptance.
Huang, Hsiao, Tang, and Lien (2014) already proved in their study that perceived usefulness
and subjective norms are directly related to each other in terms of adopting virtual platforms

33
for learning. Hence, we can say that both of these theories play a role when it comes to the
adoption of new technology and using it.

2.8 Research Model

Figure1: Theoretical Model

Where,
2.8.1 Control Variables
 Age
 Type of investment
2.8.2 Project-Related Factors = (Independent Variables)

 Network Externality
 Perceived Informativeness

34
2.8.3 Fundraisers’ Related Factors (Independent Variables)
 Value Congruence
 Social Interaction Ties
2.8.4 Funders’ Related Factors (Independent Variables)
 Herding
 Perceived Risk
2.8.5 Platform-Related Factors= (Independent Variables)
 Blockchain Technology
 Perceived Accreditation
 Structural Assurance
 Third-Party Seal
2.8.6 Trust Beliefs=Mediator
 Calculus Trust
 Relational Trust
2.8.7 Investor Intention to Participate in Crowdfunding= Dependent Variable

35
 Figure2: Theoretical Framework of Study
2.8 Definitions of Variables (See Annexure A)

3. RESEARCH METHODOLOGY
3.1 Research Design
The research design will be a Mixed-Method Research (MMR) design to address the broad
purpose and in-depth understanding (Onwuegbuzie & Collins, 2007; Onwuegbuzie &
Johnson, 2006) of challenges, opportunities, and viability of crowdfunding in Pakistan by
recording the experts and investor opinion. Since no data has been gathered before in Pakistan
this research will be exploratory for addressing the first objective. The opinion of related
experts will be explored the process, problems, and suggestions for the implementation,
institutionalization, and improvement of the process of crowdfunding platforms in Pakistan.
For the second and third objectives, a close-ended questionnaire will record the investors’
perception of the crowdfunding platform.
3.2 Nature of the Study
The nature of this study is qualitative and quantitative that will use MMR through Convergent
Parallel Design to determine and to seek out the prerequisite factors (Kerrigan, 2014) , that are
needed to promote a crowdfunding platform in Pakistan and to enhance the community’s
participation in learning about how the crowdfunding platforms work in Pakistan. In
Convergent Parallel Design the quantitative and qualitative administrated concurrently that
will start and end at the same time nature is also most relevant to this study as this study
explores two different topics which are different (i.e., qualitative and quantitative) but they
both work parallel to each other and will be analyzed together (Onwuegbuzie & Collins, 2007;
Yapicioglu & Kaptan, 2017).
Mixed-Method Research (MMR) will be used to gather a combination of qualitative and
quantitative data to ensure the statistical information and at the same time view expert’s
36
opinion to rationalize their actions. This study will utilize a semi-structured interview guide
along with a survey to gather data for its research questions. The purpose of this research is to
figure out how crowdfunding can assist young and new entrepreneurs to gather financial
capital for their projects across Pakistan.
MMR is selected for this study as this study requires both qualitative and quantitative data to
develop results that can be generalized but also give an in-depth analysis of how
crowdfunding platforms can enhance their operations. As a result, it involves mixing at all
three levels of the method, methodology, and Paradigm Mental Model (Geen, 2012).
3.3 Target Population
The target population of this qualitative research for the first objective will be all industry
experts especially from SECP who are directly involved in legal reforms and policymaking
processes. It includes all those experts like platform owners and officials and those who are
part of making regulatory sandbox of the crowdfunding platform.
For quantitative research, our target population will be investors and potential investors who
have a social media identification (Facebook, LinkedIn, forums, Twitter, emails, etc.) already
invested in any business/stocks for the past two years or are planning to invest. Data will be
taken from investors (accredited, non-accredited), and identified potential investors.

3.5. Sample Size

For qualitative research, the interviews will be stopped after the saturation point (Bowen,
2008). For quantitative data, the sample size will be seven times that of the questionnaire
items to gather sufficient data (Hair, Jospeh, Blalck, & Babin, 1998). According to Hair et al.
(1998), a sample size of 200 to 400 is adequate for Structural Equation Modeling (SEM) to
provide precise results. Kline (2011) backed this up by stating that the sample size for SEM
should be big enough (N > 200). In addition to this, the sample will be taken from the two
provinces namely and Punjab and Sindh to generalize the study to Pakistan because the
number of MSMEs working in Punjab are 65% Sindh 18% KPK 14% Baluchistan 2% (Shafi,
Ren, & Liu, 2020). Punjab has the largest percentage of SMEs then and Sindh, both of them
are rich in entrepreneurial ventures. Moreover, the literacy rate is higher in Punjab and Sindh
so we will target potential investors mainly from Punjab and then Sindh provinces.

37
 3.3.1 Participants
For the qualitative study, participants will be selected purposefully due to their expertise in the
related field. The researcher will ask for in-depth answers to questions for the qualitative data
needed for this study. Open-ended questions of the interview will be asked to all experts and
SECP officials, who are a part of the crowdfunding process, which will help in gathering data
about crowdfunding platforms its challenges, opportunities, and prerequisites and how they
can enhance their operations, and the legal framework required to operate these platforms.
Emails will be sent to prospective respondents by asking their consent whether they would
like to participate in research about crowdfunding in Pakistan. For the quantitative study,
participants will be accredited investors, non-accredited investors, and mainly sophisticated
potential investors, and they will be selected via the snowball technique.
3.4 Data Sources
Primary data will be collected from experts and government officials especially from SECP in
the form of interviews and field notes with the help of the interview guide.
Secondary data will be gathered from investors and potential investors with the help of
incubation centers, investor’s forums, and individual potential investors from Punjab and
Sindh province as they cover the majority of the businesses and the majority of the
population.
3.5 Data Collection Procedure
For addressing the first objective, a series of direct questions and probing questions have been
generated by the researcher that will be asked from the experts and SECP official regulatory
authority that is responsible for making regulatory sandbox for crowdfunding platform
formation. The interview will be conducted in-person and notes and audio recordings will be
taken with the permission of the participant. The interview will be semi-structured and will
consist of open-ended questions. The researcher will use a non-directive style of interviewing
to get the unbiased opinion of the participants. Since this study requires mixed data, a
questionnaire will be sent to the investors which can be divided into three categories; the
government-approved investors, the investors who invest but are not recognized, and
sophisticated potential investors. The questionnaire will be sent to them via email which they
will be sent back to the researcher after filling.

38
For research objectives two and three, questionnaires will be sent to various incubation
centers, private investor’s forums, and individual potential investors to take data from
investors to get rich and relevant data for the research.
3.7 Sampling Techniques
Purposive sampling will be used for taking data of the first objective from the participants for
this study. This type of sampling is used when the researcher needs to find participants that
can contribute to the study richly in terms of information needed for the study and fulfill the
needs of the study (Mack, 2005). The selection process was dependent on the experience of
the individual and how their experience could contribute to the study (Walthoff‐Borm,
Vanacker, & Collewaert, 2018). Interviews will be stopped after the saturation point (Bowen,
2008).
For quantitative data collection, the snowball technique will be used to gather the participants
(Biernacki & Waldorf, 1981). If our respondent is not widespread and its sampling frame is
not available, then we will do snowball sampling as the phenomenon of snowball sampling is
pocketed sampling and it is a nonprobability sampling (Johnson, 2014). This technique will
help reach many investors list present in incubation centers, private investment firms, investor
forums, and private single investors to gather rich and relevant data. In addition to this,
government organizations and government-backed investors will also be approached for this
study.
3.8 Statistical Techniques
The qualitative data will have emerging themes that need to be recognized during the process
of collection. NVivo, a qualitative data analysis software that makes it easier to handle large
amounts of qualitative data and arrange it more systematically will be used.
For the quantitative data, Smart PLS will be used to generalize the answers and to analyze the
data gathered. We have selected the Partial Least Square (PLS) method to analyze the data.
The reason for this is because this study is exploratory so we need to conduct an exploratory
analysis. It is mainly used when building up a theory where the research is prediction-oriented
(Henseler, Ringle, & Sinkovics, 2009). A pilot testing will be done after taking the initial 20
samples.

39
For qualitative study after interviews, transcription will be prepared for further analysis.
Themes and subthemes will be extracted from subscriptions and important factors will be
recognized. It would be an ethnography method to understand the underpinning phenomenon
and theory.
For quantitative study questioners will be collected from the respondent’s data of
questionnaires will be analyzed through regression and then. Research design is explanatory
so it would be regression analysis (mediated and moderated) to explain the relationships.
3.9 Statistical Tool
 NVivo will be used for themes extraction in exploratory research with the help of codes and
sub codes.
 PLS-SEM will be used for analyzing moderated mediation for quantitative research.
3.10 Model Specification
Moderated mediation will be applied to quantitative data
Model: Conceptual Diagram

Figure: Moderated Mediation

40
Figure: Statistical Diagram
3.11 Moderated Mediation Equation
Conditional indirect effect of X on Y through Mi = (a1i +a3i W) bi
Algebra to calculate indirect and/or conditional effects by writing model as Y = a + bX:
Y = b0 + b1M + c'X
M = a0 + a1X + a2W + a3XW
Model Equation(s):
Y = b0 + b1X
II= b0 + b1(NE)
For network externality
Y = b0 + b1M + c'X
Y = b0 + b1(TB) + c' (NE) (II)
M = a0 + a1X + a2W + a3XW
M = a0 + a1(NE) + a2(TA) +a3 (NE)
Where NE = network externality, TA = Technology Awareness, TB= trust beliefs
The individual construct of our model might be employed as a consolidated second order
construct.
3.12 Diagnostic Tests
PLS (Partial Least Square) is a modeling technique that uses ordinary least squares (OLS)
multiple regression to measure model parameters without requiring any distributional

41
assumptions. This study will utilize PLS-SEM (Structural Equational Modelling) as one of the
analysis tools for formative and reflective measurement models. An important reason for
using PLS-SEM includes is a non-normal distribution of data, small sample size, and
formative measurement constructs. By generating latent variable scores that jointly minimize
the residuals of ordinary least squares (OLS) regressions in the model (i.e., maximize
explanation) is the basic goal of PLS-SEM. The full SEM model comprised of a measurement
model, which related the variables to the construct, as well as a structural model, which
connected the constructs to other constructs.
Measurement models are evaluated based on the following: Reliability, convergent validity,
indicator collinearity, statistical significance, and relevance of the indicator weights (Hair Jr,
Matthews, Matthews, & Sarstedt, 2017). According to Garson (2016), the following are initial
assessment tests of measuring model of PLS-SEM.
3.12.1 Initial Assessment Checks
3.12.2 Assessment Reliability
Composite reliability is used to evaluate the internal consistency reliability of construct
measures. Overall, composite reliability presents a more appropriate measure of internal
consistency reliability. The value of Composite reliability should be 0.7 or higher (Bagozzi &
Yi, 2012).
3.12.3 Construct Validity
Campbell and Fiske (1959) proposed two approaches to assess the construct validity of a test:
1) convergent validity, degree of confidence that indicators properly measure a trait; and 2)
discriminant validity, degree to which measures of different traits are unrelated.
3.12.4 Assessment of Convergent Validity
PLS assesses the measurement model by generating factor loadings for each indicator, which
can be interpreted similarly to the results produced by PCA (Sadidi, Khalilifar, Amiri, &
Moradi, 2018). In the case of convergent validity, the values are accepted when each indicator
has outer loadings above 0.70, and when the average variance extracted (AVE) of each
construct is 0.5 or higher.
3.12.5 Assessment of Discriminant Validity

42
Discriminant validity represents the extent to which a construct is empirically distinct from
another construct; in other words, the construct measures what it is intended to measure. The
heterotrait - monotrait (HTMT) ratio of correlation is a new criterion for assessing
discriminant validity in PLS - SEM models . The value of HTMT inference < 1 (Fornell &
Larcker, 1981).
3.12.6 Standardized Root Mean Square Residual (SRMR)
Standardized root mean square residual (SRMR) is an approximate measure of model
goodness of fit which may be used for formative models. It measures the difference between
the observed correlation matrix and the model-implied correlation matrix. The SRMR reflects
the average magnitude of such differences, with lower SRMR being a better fit. By
convention, a model has good fit when SRMR is less than .08 (Hu & Bentler, 1998). Some
use the more lenient cutoff of less than .10.
3.12.7 Multicollinearity of the Indicators
Multicollinearity generally occurs when there are high correlations between two or more
predictor variables This creates redundant information, skewing the results in a regression
model. A well-fitting measurement model should not display excessive multicollinearity of
indicator variables in the set for any given modeled factor according to Hair et al. (2014: 97).
Multicollinearity may be a problem if tolerance is less than 0.20 or if the variance inflation
factor (VIF) exceeds 5. Hair et al. (2014: 125) suggest factors flagged for high
multicollinearity by the tolerance or VIF tests must be dropped from the model or
operationalized in some different manner.

43
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