Involving customers is often considered a method to develop products in line with market needs. However, we still need to obtain more insights into the respective drivers and outcomes in the context of (a) the involvement of customers by entrepreneurial ventures and (b) business-to-consumer (B2C) relationships. This study suggests that reward-based crowdfunding can provide a digital opportunity for both areas. We explore how communityderived social capital influences ventures’ approach to engaging backers in new product development and how this, in turn, advances product innovativeness. Using structural equation modeling, we test a unique dataset that combines primary survey and secondary platform data from 710 crowdfunding ventures. Our results provide a nuanced picture of how social capital dimensions are associated with backers as an information source and as codevelopers and, indirectly, with new product innovativeness. This study underscores that crowdfunding serves as a digital platform for market-oriented innovation. It contributes empirical insights into how nascent teams can engage the digital crowd in product development via crowdfunding. We also add to social capital literature by illuminating web-mediated mechanisms that transform knowledge into tangible innovation outcomes.

Introduction

A recent analysis found that the main reason for entrepreneurial failure is a lack of knowledge about market needs (CB Insights, 2018). Hence, both scholars and practitioners propose that involving market participants in product development may help firms understand the needs of their potential clients and lead to a joint creation of innovative products that meet market demands (Chang and Taylor, 2016; Tams, 2018). However, our understanding of third-party engagement in firms’ innovation efforts is insufficient in several ways. First, scholars agree that established companies can substantially improve new product success by including customers in their innovation activities (Foss et al., 2011; Gruner and Homburg, 2000; Lynch et al., 2016). Yet, little attention has been paid to the perspective of new entrants (Coviello and Joseph, 2012). Traditional open innovation paradigms do not clarify whether nascent organizations benefit from such interactions since they do not yet possess the knowledge stocks to absorb and organize the information extracted from a large group of individuals effectively (Cohen and Levinthal, 1990; Lüthje and Herstatt, 2004). Second, many studies focus on external party involvement in new product development in business-to-business (B2B) settings (Gemser and Perks, 2015). Research on consumer involvement in business-toconsumer (B2C) relationships, however, is still in its infancy and the contingencies of beneficial consumer engagement are still being debated. Identifying, recruiting, and motivating non-professional individuals for innovation activities is considered challenging (Lüthje and Herstatt, 2004; Mahr et al., 2014). Furthermore, the diverse ideas of a large number of parties might complicate product development (Fang, 2008). Hence, positions diverge on the effectiveness and facilitators of consumer involvement (Hoyer et al., 2010).