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

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.

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.

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.

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.

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.

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.

After the great economic crisis of 2008 the absolute outcome of which is still argued, the topic of alternative investment possibilities, such as business angels, crowdfunding, peer-to-peer investments, were broadly highlighted in the European Union member states. Few suggest that in spite of the floating understanding of the topic, alternative investments managed to significantly increase the access to finance for start-ups and small and medium enterprises (SMEs) providing the overall support to economic recovery. The positive effects of alternative investment market development is now a matter of fact – recent studies suggest European alternative finance market to reach 2,957 million of euro by 2014. On the other hand, the absence of overall awareness of entrepreneurs about the alternative investment possibilities, still weak legislative regulation, market specifics, and other challenges alike are hindrances that do persist. The main aim of this paper is, while acknowledging the key aspects of crowdfunding, to form a grounded understanding to what extent crowdfunding might support SMEs on their way to solve the challenges of access to finance. In order to reach the goal of the research an analysis of investment specifics, prior experience of the crowdfunding investments as well as core financial needs of SMEs will be acknowledged. The main finding of the paper suggests that crowdfunding while being an excellent tool for social or entertainment project financing can hardly be a significant financing tool for the European SMEs.

There is arguably a balance between exploration and exploitation within a commercial organization which leads to sustainable growth and value creation. Exploratory activities are associated with search, innovation, risk-taking and experimentation. Activities, such as selection, implementation and execution are considered exploitative in nature. We show that the governance structures and mechanisms that are typically employed in venture capital-backed companies ensure an optimum balance between the exploratory behavior of entrepreneurs and the exploratory focus of venture capitalists. New players in the venture capital cycle, such as crowdfunding platforms and corporate venture capital units, often fail to understand the importance of the interaction and interrelation between the apparently opposing exploratory and exploitative activities. However, collaborative venture capital models that are currently emerging appear to restore the necessary equilibrium in the “new” venture capital cycle.

Current trends in financial services are characterised by two intertwined developments. First, increasing digitalisation provides opportunities to invest or raise money through channels that have not been available with more traditional financial services. Crowd-investing and social-trading platforms act as new intermediaries. Similarly, automated advice (robo-advice) is attracting increased attention. Second, the financial crisis of 2007–2010 is associated with a considerable decline in trust in financial institutions, even more so in Iceland, which had experienced a complete collapse of its banking system. Despite the evaporation of trust in their banking system, Icelandic consumers were largely bound to use Icelandic financial institutions because capital controls were in place since the financial crisis until 2017, which limited investors’ opportunities to, for example, diversify their portfolios internationally. As financial decisions are inherently risky and since financial services have the characteristics of credence goods, those who wish to use financial services need to trust financial intermediaries or the immediate contractual partner. The purpose of this chapter is to examine the role of trust in the context of increased digitalisation, and to discuss steps to establish trust in digitalised financial services. Among other items, we discuss the information requirements accompanying financial products and financial institutions, data protection and liability in the context of emerging digitalisation. Our work holds implications for individuals, financial service providers, policy makers and supervisory authorities.

Research in entrepreneurship is increasingly exploring how archetypes, taxonomies, typologies, and configurations can help scholars understand complex entrepreneurial phenomena. We illustrate the potential for set-theoretic methods to inform this literature by offering best practices regarding how qualitative comparative analysis (QCA) can be used to explore research questions of interest to entrepreneurship scholars. Specifically, we introduce QCA, document how this approach has been used in management research, and provide step-by-step guidance to empower scholars to use this family of methods. We put a particular emphasis on the analytical procedures and offer solutions to dealing with potential pitfalls when using QCA-based methods and highlight opportunities for future entrepreneurship research.

Extant literature on entrepreneurship highlights the importance of the entrepreneurs' social network in mobilizing resources for their ventures. Over the last few years, entrepreneurial crowdfunding opportunities have become a subject of growing research interest as it acts as a tool to mobilize financial resources. However, many of these studies are limited within the scope of new ventures, creative industries, and commercial entrepreneurship. In this study, we examine crowdfunding within the context of social entrepreneurship in order to gain a deeper understanding of the motivation and the characteristics of the pool of individuals that contribute to social entrepreneurial crowdfunding. Data for this study have been collected from four cases of social entrepreneurial crowdfunding campaigns. The campaigners, who raised the funds in France for social ventures based in India, shared their knowledge of 157 individuals that contributed to their crowdfunding campaign. The findings inform that crowdfunders mainly originate from the crowdfunding campaigner's helper network, such as family, friends, and colleagues. A small percentage were also acquaintances and strangers. This network of individuals was motivated to support the campaigner achieve her/his goal or was attracted to the social cause that triggered them in creating a social impact. Moreover, the crowdfunders were generally open-minded and well-traveled individuals accustomed to participating in social and voluntary activities. Our study reveals that some members of the helper network are likely to disappoint by not supporting the crowdfunding campaign, thus emphasizing a twist to the existing literature on entrepreneurship. This has practical implications that prompt social entrepreneurs to exercise their social capital, networking skills, and communication strategies to attract and expand their community of helpers in order to trigger individuals from both their helper network as well as individuals outside their current network toward crowdfunding.