Crowdfunding allows founders of for-profit, artistic, and cultural ventures to fund their efforts by drawing on relatively small contributions from a relatively large number of individuals using the ...internet, without standard financial intermediaries. Drawing on a dataset of over 48,500 projects with combined funding over $237M, this paper offers a description of the underlying dynamics of success and failure among crowdfunded ventures. It suggests that personal networks and underlying project quality are associated with the success of crowdfunding efforts, and that geography is related to both the type of projects proposed and successful fundraising. Finally, I find that the vast majority of founders seem to fulfill their obligations to funders, but that over 75% deliver products later than expected, with the degree of delay predicted by the level and amount of funding a project receives. These results offer insight into the emerging phenomenon of crowdfunding, and also shed light more generally on the ways that the actions of founders may affect their ability to receive entrepreneurial financing.
•The vast majority of crowdfunded efforts appear to attempt to deliver promised goods, but most projects are delayed.•Successful crowdfunding appears to be related to signals of quality of the proposed project.•Geographic factors influence the nature and success of crowdfunding.
This article focuses on how crowdfunding might democratize the commercialization of innovation as well as financing. First, it examines how crowdfunders decide what effort to support and asks how do ...crowd and expert decisions differ? Second, it investigates whether crowdfunding democratizes access to capital by asking whether groups that have historically been underrepresented in capital markets gain additional access to capital markets through crowdfunding. Finally, it investigates whether crowdfunding leads to the growth of new firms in the same way that traditional funding does. Taken together, these questions point at a potentially vast alternative infrastructure for developing, funding, and commercializing innovation.
In this paper, we examine when members of underrepresented groups choose to support each other, using the context of the funding of female founders via donation-based crowdfunding. Building on ...theories of choice homophily, we develop the concept of activist choice homophily, in which the basis of attraction between two individuals is not merely similarity between them, but rather perceptions of shared structural barriers stemming from a common social identity based on group membership. We differentiate activist choice homophily from homophily based on the similarity between individuals ("interpersonal choice homophily"), as well as from "induced homophily," which reflects the likelihood that those in a particular social category will affiliate and form networks. Using lab experiments and field data, we show that activist choice homophily provides an explanation for why women are more likely to succeed at crowdfunding than men and why women are most successful in industries in which they are least represented.
In fields as diverse as technology entrepreneurship and the arts, crowds of interested stakeholders are increasingly responsible for deciding which innovations to fund, a privilege that was ...previously reserved for a few experts, such as venture capitalists and grant-making bodies. Little is known about the degree to which the crowd differs from experts in judging which ideas to fund, and, indeed, whether the crowd is even rational in making funding decisions. Drawing on a panel of national experts and comprehensive data from the largest crowdfunding site, we examine funding decisions for proposed theater projects, a category where expert and crowd preferences might be expected to differ greatly. We instead find significant agreement between the funding decisions of crowds and experts. Where crowds and experts disagree, it is far more likely to be a case where the crowd is willing to fund projects that experts may not. Examining the outcomes of these projects, we find no quantitative or qualitative differences between projects funded by the crowd alone and those that were selected by both the crowd and experts. Our findings suggest that crowdfunding can play an important role in complementing expert decisions, particularly in sectors where the crowds are end users, by allowing projects the option to receive multiple evaluations and thereby lowering the incidence of “false negatives.”
This paper was accepted by Lee Fleming, entrepreneurship and innovation
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Performance differences between firms are generally attributed to organizational factors rather than to differences among the individuals who make up firms. As a result, little is known about the ...part that individual firm members play in explaining the variance in performance among firms. This paper employs a multiple membership cross-classified multilevel model to test the degree to which organizational or individual factors explain firm performance. The analysis also examines whether individual differences among middle managers or innovators best explain firm performance variation. The results indicate that variation among individuals matter far more in organizational performance than is generally assumed. Further, variation among middle managers has a particularly large impact on firm performance, much larger than that of those individuals who are assigned innovative roles.
Employees can build their careers either by moving into a new job within their current organization or else by moving to a different organization. We use matching perspectives on job mobility to ...develop predictions about the different roles that those internal and external moves will play within careers. Using data on the careers of master of business administration alumni, we show how internal and external mobility are associated with very different rewards: upward progression into a job with greater responsibilities is much more likely to happen through internal mobility than external mobility; yet despite this difference, external moves offer similar increases in pay to internal, as employers seek to attract external hires. Consistent with our arguments, we also show that the pay increases associated with external moves are lower when the moves take place for reasons other than career advancement, such as following a layoff or when moving into a different kind of work. Despite growing interest in boundaryless careers, our findings indicate that internal and external mobility play very different roles in executives’ careers, with upward mobility still happening overwhelmingly within organizations.
Online communities play an increasingly important role in developing innovation. However, relatively little is known about the ways in which community affiliation influences how innovations and ...products generated in these communities are commercialized. By examining open source software (OSS) as an example of an innovation community and using both a quasi experiment and a longitudinal survey, I seek to shed light on this issue. In the quasi experiment, using the launch of the Apple App Store, I find a decreased propensity toward commercialization among individuals associated with online community innovation. I then examine the mechanisms for this decreased commercialization with a novel longitudinal survey of OSS community members. Despite the history of OSS as an anticommercial community, I do not find that anticommercial attitudes play a role in commercialization decisions. Instead, differences in entrepreneurial self-identity have large significant effects on the propensity to commercialize. I conclude with a discussion of the implications of these findings for the literatures on both entrepreneurial identity and community innovation.
How does employer status benefit firms in the market for general human capital? On the one hand, high status employers are better able to attract workers, who value the signal of ability that ...employment at those firms provides. On the other hand, that same signal can help workers bid up wages and capture the value of employers' status. Exploring this tension, we argue that high status firms are able to hire higher ability workers than other firms, and do not need to pay them the full value of their ability early in the career, but must raise wages more rapidly than other firms as those workers accrue experience. We test our arguments using unique survey data on careers in investment banking.
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