The Crowdfunding Paradigm
Crowdfunding has become a major consideration for individuals looking to fund their ideas, endeavors, and businesses. This phenomenon raises interesting questions for management scholars, such as what theories help to explain the nuance of crowdfunding as a form of entrepreneurial financing. With regard to what leads to crowdfunding campaign success, this chapter argues that there are mixed motives associated with contributing to these campaigns, and theoretical dynamics vary according to these different motives. The chapter also notes two fundamental differences of crowdfunding from more traditional means of funding early-stage ventures: the nature of engagement and preference toward product or person. Drawing on theory related to capabilities, the chapter identifies conditions under which crowdfunding is likely to be more and less advantageous based on these two dimensions. In summary, it provides a model that explains important sources of heterogeneity (i.e., motives) and homogeneity (i.e., diffused engagement and product lock-in) within the crowdfunding phenomenon that add nuance to theory in the entrepreneurial financing literature.