• Crowdfunding industry—History, development, policies, and potential issues

      Zhao, Ying; Harris, Phil; Lam, Wing; University of Chester (Wiley, 2019-03-14)
      Crowdfunding has gained a great deal of attention from policy makers, researchers, and practitioners. This paper attempts to provide an overview of the history and development of the industry and discusses different types of crowdfunding and their public policies. It is identified that the operation of peer‐to‐peer lending and equity‐ based crowdfunding is regulated by the Financial Authority; the reward‐based crowdfunding (RBC) and donation‐based crowdfunding (DBC) is yet to be regulated, neither in the United Kingdom or United States. The lack of rules and regulations in the latter two models highlights the burning issues such as potential fraud and mal- practice. Therefore, we suggest that it is timely to consider regulating the two types of crowdfunding possibly by governance mechanism with reporting requirements to keep track of the fund and to provide timely information. Additionally, it is advisable that practitioners to work on an agreed framework to establish industry standard, so potential investors can compare and assess the quality of projects easily. Finally, the management of crowdfunding platforms especially the RBC and DBC platforms should be improved. The ease of launching campaigns has made it difficult for both initiators and investors to succeed in the crowdfunding process. Further research to develop some form of assessment framework would be useful to both parties.
    • Understanding UK Rewards-based Crowdfunding as an Alternative Source of Entrepreneurial Finance

      Harris, Phil; Lam, Wing; Zhao, Ying (University of ChesterUniversity of Chester, 2019-06)
      Entrepreneurial financing plays a vital role in the survival and viability of businesses (Crosetto & Regner, 2018; Mason & Harrison, 1991; Signori & Vismara, 2017; Zhao et al., 2019). Research studies and financial commentators have suggested that reward-based crowdfunding (RBC) plays an increasingly important role in the process of business start-ups (Baeck et al., 2014; Bilau & Pires, 2018; Lelo de Larrea et al., 2019; Mollick, 2014). However, a review of literature indicates that little is known about the field of RBC from a theoretical perspective. Therefore, the main aim of the thesis is to address the knowledge gap by developing a conceptual framework to advance understanding of the RBC funding process through using a signalling theory lens. The author adopted a pragmatist epistemological stance. This study collected publicly available data of 636 UK start-up projects on a RBC platform, Kickstarter, from September to December in 2017 and repeated this for the same period in 2018. It was found that signal observability (the size and quality of the fundraiser’s network) play a significant role in crowdfunding success across all projects. Whereas, prosocial intention (charitable purpose) plays a stronger role in predicting the likelihood of the success of projects with a medium goal. This study identifies and evaluates how the key factors (project quality, project intention and signal observability) impact on crowdfunding’s success, as well as investigates the interplay between different actors (signallers, receivers and signals) in the RBC market. A further important contribution of this work arises from the use of rich qualitative data in addition to the quantitative research approaches previously utilised by others (Bi, Liu and Usman, 2017; Kunz et al., 2017). The thesis makes contributions to both theory and practice. The findings have major implications for different parties including: policy makers, practitioners, researchers and educators. It provides an insight for practitioners considering the adoption of a crowdfunding approach and the knowledge and recommendations in running a successful RBC campaign. It also helps nascent entrepreneurs to reconstruct their financing strategy through the better understanding of the position of RBC in entrepreneurial financing. An important implication is that this study can help policy makers to better understand the RBC industry, which is essential in developing relevant policies in this under-governed area. Finally, this research contributes to growing knowledge and interest in entrepreneurial finance, especially in the online alternative finance market, which is beneficial for both researchers and educators.