Market imperfections and crowdfunding

Anton Miglo, Victor Miglo

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)
4 Downloads (Pure)

Abstract

This article is the first one that considers the choice between the different types of crowdfunding and traditional financing under different types of market imperfections. In contrast to most existing literature, we focus on financial aspects of crowdfunding rather than on price discrimination between customers
using a new approach on the demand side. The model provides several implications, most of which have not yet been tested. For example, we find that when asymmetric information is important, high-quality projects prefer reward-based crowdfunding. A low-quality firm may find it unprofitable to mimick this strategy as it will be taking more risk to achieve a threshold. This result is contradictory to the spirit of the results in Belleflamme et al. (Journal of Business Venturing:Entrepreneurship, Entrepreneurial Finance, Innovation and Regional Development, 29(5), 585–609, 2014), which finds that asymmetric information
favours equity-based crowdfunding. In contrast to Belleflamme et al. (Journal of Business Venturing:Entrepreneurship, Entrepreneurial Finance, Innovation
and Regional Development, 29(5), 585–609, 2014), in our model, crowdfunding does not have any ad-hoc non-monetary benefits.
Original languageEnglish
Pages (from-to)51–79
Number of pages29
JournalSmall Business Economics
Volume53
Issue number1
DOIs
Publication statusPublished - 1 Jan 2019

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