How to Disclose? Strategic AI Disclosure in Crowdfunding

TL;DR

This study investigates how mandatory AI disclosure in crowdfunding impacts project success, revealing that disclosure often reduces funding but can be mitigated by strategic signaling and authenticity cues.

Contribution

It provides empirical evidence on the effects of AI disclosure strategies in crowdfunding, combining natural experiments and online experiments to identify moderating signals.

Findings

Mandatory AI disclosure decreases funds raised by 39.8% and backers by 23.9%.

High authenticity and explicitness in disclosure mitigate negative effects.

Excessive emotional positivity can worsen crowdfunding outcomes.

Abstract

As artificial intelligence (AI) increasingly integrates into crowdfunding practices, strategic disclosure of AI involvement has become critical. Yet, empirical insights into how different disclosure strategies influence investor decisions remain limited. Drawing on signaling theory and Aristotle's rhetorical framework, we examine how mandatory AI disclosure affects crowdfunding performance and how substantive signals (degree of AI involvement) and rhetorical signals (logos/explicitness, ethos/authenticity, pathos/emotional tone) moderate these effects. Leveraging Kickstarter's mandatory AI disclosure policy as a natural experiment and four supplementary online experiments, we find that mandatory AI disclosure significantly reduces crowdfunding performance: funds raised decline by 39.8% and backer counts by 23.9% for AI-involved projects. However, this adverse effect is systematically moderated by disclosure strategy. Greater AI involvement amplifies the negative effects of AI disclosure, while high authenticity and high explicitness mitigate them. Interestingly, excessive positive emotional tone (a strategy creators might intuitively adopt to counteract AI skepticism) backfires and exacerbates negative outcomes. Supplementary randomized experiments identify two underlying mechanisms: perceived creator competence and AI washing concerns. Substantive signals primarily affect competence judgments, whereas rhetorical signals operate through varied pathways: either mediator alone or both in sequence. These findings provide theoretical and practical insights for entrepreneurs, platforms, and policymakers strategically managing AI transparency in high-stakes investment contexts.