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Book part
Publication date: 20 July 2016

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International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Content available
Book part
Publication date: 20 July 2016

Abstract

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Book part
Publication date: 20 July 2016

Jérôme Méric

The purpose of this chapter was to deconstruct the underlying contradictions of crowdfunding practices and to show how crowdfunding practitioners develop a schizophrenic…

Abstract

Purpose

The purpose of this chapter was to deconstruct the underlying contradictions of crowdfunding practices and to show how crowdfunding practitioners develop a schizophrenic use of these contradictions.

Methodology/approach

The main contradictions of crowdfunding practices are introduced with theoretical references. Then short cases are used to illustrate how crowdfunding practitioners try to cope with these contradictions.

Findings

The crowd addresses many contradictions, first because it is a syncretic concept, second because online crowds are still to be proven crowds. In any case, crowdfunding practitioners do their best to take the advantage of these contradictions, and run the risk of falling between two stools.

Originality/value

An attempt to provide an analysis of crowdfunding as a social, and not only economic, phenomenon, to suggest avenues for further critical research on crowdfunding.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

Book part
Publication date: 20 July 2016

Rémi Jardat and Yvon Pesqueux

In this chapter, we explore to what extent psychological contracts occur between the crowdfunded and the crowdfunders. First argument: fundamentals of finance imply a…

Abstract

In this chapter, we explore to what extent psychological contracts occur between the crowdfunded and the crowdfunders. First argument: fundamentals of finance imply a psychological dimension in financial transactions, which are at the same time contractual. Second arguments: some concrete cases of crowdfunding scandals pertain to contractual violation, which provides evidence for the importance of psychological contracts in crowdfunding projects and processes. This leads to two contributions: (1) a systematic review of the concepts related to psychological contracts theory and the assessment of their transferability to crowdfunding and (2) a list of questions and operational recommendations for every crowdfunding project developer.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

Book part
Publication date: 20 July 2016

Leire San-Jose and Jose Luis Retolaza

Crowdfunding is an emergent practice that is increasing exponentially as a means of financing to complement company capital. This chapter focuses on an innovative way of…

Abstract

Purpose

Crowdfunding is an emergent practice that is increasing exponentially as a means of financing to complement company capital. This chapter focuses on an innovative way of organizing peer-to-peer lending, known as crowdlending. The characteristics of crowdlending are social reward or interest and using the Internet as a medium for communication, prospection and raising funds. To fill the gap in the literature in this regard, this chapter addresses the following questions: Can crowdfunding be considered as a feasible conventional financial tool? What makes crowdlending work? Is it possible to apply the mutual cash holding (MCH) model to crowdlending as well as to previous examples such as the Mondragon Corporation and Trocobuy?

Methodology/approach

We use three cases (Mondragon Corporation, Trocobuy and Arboribus) to highlight financial tools that use the concept of stakeholder theory that is based on the collaborative management of cash surpluses. Using the Delphi technique combined with in-depth interviews we demonstrate the contribution of the MCH model to crowdlending. We show that the model could be applied to different organizations, thereby indicating its robustness and implying that it could be used in many other cases.

Findings

The present study suggests that crowdlending describes a new financing tool as a principal form of lending; it enables companies to implement a financial tool that allows for social development and stakeholder participation and that can ensure companies’ financial sustainability.

Practical implications

This model is based on six elements: expectations of mutual benefits, trust, management, guarantees, mutual profit and benefit. It suggests mutual benefit and positive social values for all stakeholders. However, cash surpluses will be efficiently used only when crowdlending is relevant to investors’ economic objective, because crowdlending as a social innovation does not in itself guarantee economic benefit.

Originality/value

The chapter provides evidence of crowdlending in practice. The research compares key cases in which the MCH model is applied. It also provides important insights into crowdlending as a social innovation.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

Content available
Book part
Publication date: 20 July 2016

Abstract

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Book part
Publication date: 20 July 2016

Denis Frydrych, Adam J. Bock and Tony Kinder

This study examines how narratives and legitimacy formation affect crowdfunding capital assembly from distributed, heterogeneous investors.

Abstract

Purpose

This study examines how narratives and legitimacy formation affect crowdfunding capital assembly from distributed, heterogeneous investors.

Methodology/approach

The study explores a dataset of 80,181 projects from Kickstarter, a rewards-based crowdfunding platform, between 2009 and 2013. We explore the link between project-related variables, legitimacy formation and outcomes.

Findings

Entrepreneurs design narratives and create project legitimacy by exploiting crowdfunding platform-specific features. First, lower funding targets and shorter campaign durations confer positive project legitimacy. Second, entrepreneurs exploit reward-levels as narrative tools that encourage funders to engage with the project. Third, visual pitches transmit a broader sociocultural narrative, leveraging emotional rather than financial reasoning. We also note certain gender effects.

Research implications

Crowdfunding platforms allow entrepreneurs to pitch business ideas to a broad online audience. We show that project legitimacy, including both structural and narrative elements, is linked to crowdfunding outcomes. In particular, legitimacy is co-created through the generation of a persuasive narrative linking the entrepreneur and investor cohort.

Practical implications

Entrepreneurs use crowdfunding platforms to generate a coherent narrative around unfamiliar business models. Generic platform tools may be set and manipulated in online crowdfunding pitches to support project legitimacy. Ultimately, these are less important than establishing an affinity-based narrative that engages and exploits investor participation. Successful crowdfunding pitches co-author the project story with investors.

Originality/value

Crowdfunding has been traditionally understood as simply an online-mediated venture resource assembly tool. A narrative framework highlights the critical role of legitimacy formation in a disintermediated investment system.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

Book part
Publication date: 20 July 2016

Ritu Srivastava

Crowdfunding though existent, is still at the nascent stage in India being limited to charity and reward-based funding of creative and social projects by the crowd. The…

Abstract

Purpose

Crowdfunding though existent, is still at the nascent stage in India being limited to charity and reward-based funding of creative and social projects by the crowd. The Indian regulatory authorities are in the process of formulating policies to encourage and monitor crowdfunding platforms that are based on financial return. The Indian Micro, Small and Medium Enterprises (MSME) sector in particular is facing financing problems, and crowdfunding could be a viable alternative to traditional sources of finance. In this context, the study attempts to suggest an operational framework for crowdfunding in India with special reference to the MSME sector in terms of eligibility norms, rules for investor protection, sustaining market integrity, providing a supportive infrastructure and defining the role of online crowdfunding platforms.

Methodology/approach

This is a qualitative study conducted through personal interviews based on unstructured questions. The Directors or Chief Finance Officers of MSME firms and Senior Officials (with minimum work experience of 15 years) in the SME divisions of banks (private and public) located in the National Capital Region, were interviewed to identify the perspectives on the research issues of the chapter. The sampling criterion allowed us to incorporate both investors’ and investees’ concerns regarding the research issues.

Research limitations

These are the inherent nature of qualitative analysis, interviewees’ individual understanding of the subject and sample size.

Practical implications

The study will contribute to the vital discussion prior to the government’s decision on role of equity and debt-based crowdfunding in India in the future.

Social implications

The study will shed light on the fact that Indian society needs to be well informed about novel investment options such as crowdfunding. The Indian MSME sector can also discuss the opportunities offered by crowdfunding with the government to reduce their problem of access to finance.

Originality/value

The scope of crowdfunding in the Indian MSME sector has not been thoroughly researched, as the phenomenon is new in India. The study highlights how the use of crowdfunding by micro, small and medium firms has the potential to boost manufacturing- and service-related business activities to further increase the national income.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

Book part
Publication date: 20 July 2016

Paul Belleflamme and Thomas Lambert

This chapter shows how the theory of industrial organization can help us understand some important aspects of crowdfunding that go beyond the finance sphere of the firm. A…

Abstract

This chapter shows how the theory of industrial organization can help us understand some important aspects of crowdfunding that go beyond the finance sphere of the firm. A special attention is devoted to the role and behavior of crowdfunding platforms, which intermediate between entrepreneurs and contributors.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

Book part
Publication date: 20 July 2016

Liz Gerber and Julie Hui

We are interested in how and why people use or take part to crowdfunding projects.

Abstract

Purpose

We are interested in how and why people use or take part to crowdfunding projects.

Methodology/approach

Over the past four years, we have interviewed over 120 crowdfunding requesters and supporters of over 15 project types from dance to technology to publishing.

Findings

The key contributions of this research are: An understanding of the work involved, an understanding of motivations for participation, and an understanding of how the design of platforms influences engagement.

Originality/value

We adopt a computer-supported cooperative work approach from sociology, computer science, and design to provide a new perspective to researchers who seek to understand user behavior, motivations, and the mechanisms in place to support engagement with crowdfunding technology.

Details

International Perspectives on Crowdfunding
Type: Book
ISBN: 978-1-78560-315-0

Keywords

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