Market imperfections and crowdfunding

Miglo, A; Miglo, V

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.

Citation

Miglo, A., & Miglo, V. (2019). Market imperfections and crowdfunding. Small Business Economics, 53(1), 51-79. https://doi.org/10.1007/s11187-018-0037-1

• Journal Article Type: Article
• Acceptance Date: Mar 21, 2018
• Online Publication Date: Apr 12, 2018
• Publication Date: Jun 15, 2019
• Deposit Date: May 25, 2021
• Journal: Small Business Economics
• Print ISSN: 0921-898X
• Electronic ISSN: 1573-0913
• Publisher: Springer Verlag
• Volume: 53
• Issue: 1
• Pages: 51-79
• DOI: https://doi.org/10.1007/s11187-018-0037-1
• Publisher URL: https://doi.org/10.1007/s11187-018-0037-1
• Related Public URLs: http://link.springer.com/journal/11187
• Additional Information: Access Information : The Accepted Manuscript of this article is available Open Access at http://www.open-access.bcu.ac.uk/6206/1/Crowd2017-34-SSRN.pdf