Abstract
Purpose
The present paper aims to explore if innovation strategies and crowdfunding campaigns can be cross-referred or even matched. These alternatives could increase the efficiency of crowdfunding processes since seeking new projects/business ideas to finance could be more targeted.
Design/methodology/approach
This paper is theoretical and explorative. Two dedicated literature reviews are carried out. The former is focused on innovation strategies and the latter is focused on crowdfunding campaigns. The offering of research propositions is the result of an inductive process.
Findings
Two main findings are achieved: first, a possible match between innovation strategies and crowdfunding campaigns (expressed by four research propositions); second, the confirmation of the role of innovation studies to corroborate the relevance of crowdfunding as an attractive field of research.
Originality/value
Previous contributions, expressly concerning the relationship between innovation strategies and crowdfunding campaigns, have mainly focused on the influence/support that crowdfunding campaigns offer to innovation strategies, by supporting or fostering them. Possible matches between innovation strategies and crowdfunding campaigns have rarely been investigated.
Keywords
Citation
Matricano, D. and Candelo, E. (2024), "Matching innovation strategies and crowdfunding campaigns: an explorative investigation", European Journal of Innovation Management, Vol. 27 No. 7, pp. 2232-2249. https://doi.org/10.1108/EJIM-03-2022-0129
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited
1. Introduction
The growing relevance that crowdfunding – generally meant – is assuming in reference to the financing of new venture ideas (Assenova et al., 2016; Vulkan et al., 2016; Butticè and Vismara, 2021; Cerpentier et al., 2021; Junge et al., 2021) has opened up several different avenues of research.
Beyond the basic interest in the types of crowdfunding campaigns, i.e. equity, reward, donation and lending (Meyskens and Bird, 2015; Paschen, 2017; Dushnitsky and Fitza, 2018; Pierrakis, 2019; Troise et al., 2020) and in the differences between them, scholars worldwide have explored (actually they are still exploiting) very different research paths. Some scholars investigate what precedes crowdfunding campaigns, such as the importance of signaling (Ahlers et al., 2015), the persuasion processes (Allison et al., 2017), the adverse incentives in crowdfunding (Hildebrand et al., 2017), and the relevance of intellectual capital (Troise et al., 2021). Other scholars study what succeeds crowdfunding campaigns, i.e. the possible results and/or outcomes of campaigns (Yang et al., 2020). Still other scholars explore additional interesting topics, such as the dynamics of crowdfunding (Mollick, 2014), its economic aspects (Belleflamme et al., 2015), the concept of sustainability related to this (Vismara, 2019), the possible gender biases (Kleinert and Mochkabadi, 2021) and the relevance of the country in which crowdfunding campaigns takes place (Dushnitsky et al., 2016; Ashta, 2018; Hoque et al., 2018; Rossi and Vismara, 2018). Regarding the financing of new venture ideas, some scholars (Cumming et al., 2021) have focused on the differences between crowdfunding from fraudfunding and on possible alerts to protect the crowd could.
From the above literature review, an unexplored avenue of research comes out. It deals with the relationship between crowdfunding and innovation. This relationship has been examined in terms of the influence/support that crowdfunding offers to innovation (Stanko and Henard, 2016, 2017; Hervé and Schwienbacher, 2018; Brem et al., 2019) by compelling scholars to wonder if and to what extent crowdfunding can democratize (Mollick and Robb, 2016; Stevenson et al., 2019) or foster innovation (Wachs and Vedres, 2021). Indeed, scarce interest has been paid to the relationship between the types of crowdfunding campaigns and the types of innovation proposed by entrepreneurs and needing to be financed (Song et al., 2020). Despite the consistent use of crowdfunding campaigns (equity, reward, donation and lending), in fact, scholars have not explored yet if and to what extent a relationship may exist between types of crowdfunding campaigns and types of innovation. The present paper tries to go beyond the choice of the crowdfunding campaign according to risks/opportunities and attempts to link this choice to the type of innovation that entrepreneurs aim to bring to markets. To fill in this research gap the paper relies on an inductive approach and formulates four research propositions that get closer crowdfunding campaigns and innovation in order to suggest hopefully useful matches. These four propositions may have several practical implications. They may help entrepreneurs to find the most suitable type of crowdfunding campaign to finance their innovations, they may help the crowd to find the best projects to invest in and they may help platforms to select and manage crowdfunding campaigns in a proper way.
In order to achieve the above aim, the present paper is structured as follows. In section 2, two dedicated literature reviews are carried out. The first is focused on the types of innovation while the second is focused on the types of crowdfunding campaigns. In section 3, the methodology of theory building is introduced and explained. In section 4, the matches between types of innovations and crowdfunding campaigns are hypothesized and the four research propositions are defined. In section 5, implications for entrepreneurs, the crowd, and platform managers are presented and discussed. Eventually, final remarks are included in section 6.
2. Literature reviews
2.1 Types of innovations
Innovation is a widely studied topic that keeps on attracting a growing interest among scholars (McAdam et al., 1998; Baregheh et al., 2009; Volberda et al., 2013; Bowers and Khorakian, 2014; Schilling, 2015; Edwards-Schachter, 2018; Coad et al., 2021). Although its relevance in management studies is unquestionable, the processes through which it is managed are not so clearly defined, implemented and verified (Van de Ven, 1986; Aghion and Tirole, 1994; Cottam et al., 2001; Hamel, 2006; Birkinshaw et al., 2008; Damanpour, 2014; Schilling and Shankar, 2019). In this paper, particular attention is paid to the types of innovations, also referred to as portfolio of innovations (Gerybadze and Reger, 1999; Ernst and Lichtenthaler, 2009; De Jong et al., 2015; Kock and Gemünden, 2021; Tiberius et al., 2021).
As proposed by Schilling (2015), innovation can be classified according to the generated output, its intensity and its impact on competences or on specific parts of a system or on the system as a whole. The most common classification of innovation considers the output generated, thus it is possible to distinguish between product, process and organizational innovation (Boer and During, 2001; Ballot et al., 2015; Snihur and Wiklund, 2019). Specifically, a “product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics” (OECD, 2005, p. 156); a process innovation, instead, is “the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software” (OECD, 2005, p. 163); and – eventually – an organizational innovation is “the implementation of a new organisational method in the firm's business practices, workplace organisation or external relations” (OECD, 2005, p. 177).
As an alternative, in reference to the intensity of the output generated, innovation can be classified as radical or incremental. According to Tushman and Romanelli (1985), radical innovations cause a reorientation in patterns that are fundamentally reordered. Incremental innovations, instead, are changes that reveal themselves through small adaptations to the status quo. In reference to the competences affected by innovation, it is possible to distinguish between competence enhancing and competence destroying innovations (Tushman and Nelson, 1990). While the former derives from previous knowledge and improves and enriches it, the latter does not derive from previous knowledge or can make it inappropriate.
Differently from the above, in reference to the impact of innovation on specific parts of a system or on the system as a whole, innovations can be modular (if they redesign of core components of a system while leaving linkages between the components unchanged) or they can be architectural (if they change the nature of interactions between core components of a system, while reinforcing the core design concepts).
Actually, the concepts of the output generated, the intensity or the impact of innovation seem to overlap since they refer to the same matter, but from different perspectives. They all can determine success or failure of firms in the competitive arena (Pacelli et al., 1998; Kobarg et al., 2019; Xin et al., 2019; Ovuakporie et al., 2021).
Among the several prominent contributions focused on the outputs generated through innovation processes, in the present paper attention is addressed to the contribution authored by Satell (2017). In his contribution, the scholar rebuilds a portfolio of innovations comprehending: breakthrough innovations, sustaining/incremental innovations, disruptive innovations and basic research. The relevance of this classification is due to the parameters selected and used to classify innovation strategies. They are the definition of the problem (the problem can be well defined or not) and the definition of the skill domain needed to solve it (also the skill domain needed to solve the problem can be well defined or not). Based on the above parameters, it is possible to figure out an innovation matrix (Table 1).
At this stage, each type of innovation included in the portfolio is going to be analyzed in order to highlight the main characteristics.
For a start, attention is addressed toward breakthrough innovation. This comes out when the problem is well defined, but the skill domain is not. Accordingly, new and unusual skill domains need to be explored. The possibility to leverage new and unusual skill domains about well-defined problems can take to breakthrough innovations (O'Connor and Rice, 2001; Srivastava and Gnyawali, 2011; Rakic, 2020; Vinokurova and Kapoor, 2020) that “are typically longer in duration and often deal with uncertain and evolving technologies, which are being created for markets that may not yet perceive a need for the product” (McDermott and Handfield, 2000, p. 36).
Sustaining/incremental innovation, instead, comes out when both the problem and the skill domain needed to solve it are well defined. In this case, the approach to innovation radically changes since researchers know where to look for solutions (a defined skill domain). In fact, sustaining innovation improves existing products, develops existing markets and allows companies to face competitors' sustaining improvements (Johnson, 2020; Escrig-Tena et al., 2021; Gui et al., 2021; Hoonsopon and Puriwat, 2021).
Concerning disruptive innovation and basic research, instead, the problem is not well defined. Accordingly, researchers involved in this innovation processes proceed randomly in the search of something new. Of course, the approach changes according to the definition of the skill domain. If this is well defined then researchers can get to disruptive innovation (Christensen et al., 2018; Rakic, 2020; Si and Chen, 2020; Martínez-Vergara and Valls-Pasola, 2021) that – as known – disrupt existing markets and create new ones. On the contrary, if the skill domain is not well defined, then researchers are involved in innovation processes concerning basic research (Arts and Fleming, 2018; Cassiman et al., 2018; Nagane and Sumikura, 2020; Akcigit et al., 2021; Yang et al., 2021). In this case, the intensity of innovation is not so strong, but it is expected to be stronger as its applications become clearer in the future.
Satell's classification (2017) offers an updated overview of the types of innovation that may open up new intriguing research avenues. Up to now scholars have not explored yet if and to what extent a suspected relationship may exist between the types of innovation and the types of crowdfunding campaigns. In other words, scholars have not attempted to link the choice of the crowdfunding campaign to the type of innovation that aspiring entrepreneurs aim to bring to markets. Reasonably, the crowd evaluating projects to finance may consider the definition of the problem and of the skill domain as relevant indicators useful to address their interest in a specific type of innovation. In order to speculate on a probable match between innovation strategies and crowd-funding campaigns, attention needs to move toward crowd-funding campaigns now.
2.2 Types of crowdfunding campaigns
Over the last years, contributions to crowdfunding have rapidly and consistently increased (Assenova et al., 2016; Vulkan et al., 2016; Butticè and Vismara, 2021; Cerpentier et al., 2021). The growing relevance of this topic is due to the fact that it represents a new way of financing new venture ideas (Junge et al., 2021). Thus several aspects related to the involvement of the crowd and the act of financing new projects have been investigated. These range from what precedes crowdfunding campaigns – for example, the importance of signaling (Ahlers et al., 2015), the persuasion processes (Allison et al., 2017), the adverse incentives in crowdfunding (Hildebrand et al., 2017), and the relevance of intellectual capital (Troise et al., 2021) – to what succeeds them, i.e. the possible results and/or outcomes of campaigns (Yang et al., 2020). Contemporarily, scholars have also identified additional interesting topics related to the dynamics of crowdfunding (Mollick, 2014), its economic aspects (Belleflamme et al., 2015), the concept of sustainability related to this (Vismara, 2019), the possible gender biases (Kleinert and Mochkabadi, 2021) and the relevance of the country in which crowdfunding campaigns takes place (Dushnitsky et al., 2016; Ashta, 2018; Hoque et al., 2018; Rossi and Vismara, 2018). Of course, in reference to the financing of new venture ideas, some studies – expressly focused on the differences between crowdfunding from fraudfunding and on possible alerts to protect the crowd (Cumming et al., 2021) – could not be missing.
In this paper, attention is focused on the types of crowdfunding, i.e. equity, reward, donation and lending (Meyskens and Bird, 2015; Paschen, 2017; Dushnitsky and Fitza, 2018; Pierrakis, 2019; Schwienbacher, 2019; Troise et al., 2020). Since the paper speculates on a possible match between types of innovation and crowdfunding campaigns, it is crucial to find out the main characteristics of each type of crowdfunding.
For a start, attention is addressed toward equity crowdfunding (Ahlers et al., 2015; Vulkan et al., 2016; Walthoff-Borm et al., 2018; Mochkabadi and Volkmann, 2020). According to the European Commission (https://ec.europa.eu/growth/access-finance-smes/guide-crowdfunding/different-types-crowdfunding/equity-crowdfunding_en), equity crowdfunding consists in selling a stake of a project/business to several investors in return for investment. The main difference between equity crowdfunding and traditional models (such as private equity, venture capital and angel investing) is that the selling is offered to the crowd (a wide range of potential investors, some of whom may also be current or future customers) rather than few, selected financiers (Vismara, 2018; Ralcheva and Roosenboom, 2020; Blaseg et al., 2021; Cumming et al., 2021).
Reward campaigns, or rewards-based crowdfunding campaigns, significantly differ from equity ones. According to the European Commission (https://ec.europa.eu/growth/access-finance-smes/guide-crowdfunding/different-types-crowdfunding/rewards-based-crowdfunding_en), they consist of crowd supporting a project/business with the expectation of receiving a non-financial reward in return, such as goods or services at a later stage (Cholakova and Clarysse, 2015; Kraus et al., 2016; Shneor and Munim, 2019). A common example is a project or business offering a unique service (rewards) or a new product (pre-selling) in return for investment. This type of crowdfunding allows companies to launch with orders already on the books and cash flow secured and gathers an audience before getting onto the markets (Frydrych et al., 2014; Nielsen and Binder, 2021). What the crowd can get back by joining equity or reward campaigns clarifies the consistent differences between them.
The third type of crowdfunding campaign examined herein is the donation one. This is a classic type of online donation, in which the crowd selflessly donates money to support a project/business (Meyskens and Bird, 2015). The most important aspect is that the crowd does not receive any reward in return (instead the crowd has a specific reward both in equity- and reward-based campaigns). In some cases, the reward can be symbolic, often intangible (Cason and Zubrickas, 2019).
The last type of crowdfunding campaign is the lending one. According to the European Commission (https://ec.europa.eu/growth/access-finance-smes/guide-crowdfunding/different-types-crowdfunding/peer-peer-lending_en), lending crowdfunding, also labeled as peer-to-peer lending or crowdlending, stands for a direct alternative to a bank loan with the difference that, instead of borrowing from a single source, projects/business can borrow money directly from the crowd. Crowdlenders often bid for loans by offering an interest rate at which they would lend. Borrowers then accept loan offers at the lowest interest rate. Internet-based platforms are used to match lenders with borrowers. Due diligence is carried out for each loan request, as crowdfunding platforms have to protect both businesses and investor interests. Platforms normally require financial accounts and a trading track record (Morse, 2015; Moysidou and Hausberg, 2020; Bernardino and Santos, 2021).
Because of the characteristics listed above, it seems clear that equity, reward, donation and lending crowdfunding campaigns are different. Accordingly, proponents of new projects/businesses (generally speaking they are aspiring entrepreneurs) should be aware of risks and opportunities related to each type of crowdfunding campaign (Junge et al., 2021).
As known, the present paper tries to go beyond the choice of the crowdfunding campaign according to risks/opportunities and attempts to link this choice to the type of innovation that aspiring entrepreneurs aim to bring to markets. In order to achieve this goal, the four types of innovation (breakthrough, sustaining/incremental, disruptive innovation and basic research) and the four types of crowdfunding (equity, reward, donation and lending) are analyzed together and matched, if possible.
3. Methodology
Developing a new theory is not easy (Kuhn, 1970). It depends on past literature plus empirical observations or experiences and it must be developed through incremental empirical testing and extension. Both theoretical and empirical perspectives need to be considered in order to support each other. Should this not happen, the hypothetical process leading to new theories development can be unsuccessful. Some phenomena might be not well known, for example when theoretical or empirical evidence is missing or when results are in contradiction among themselves, and such a situation compels researchers to look for an alternative way to develop new theories (relying on qualitative and/or quantitative methods) or for an alternative purpose. The probable match between the types of innovation and the types of crowdfunding encourages looking for an alternative purpose. As previously mentioned, this study is explorative and the research is not based on previous models, thus an inductive approach is adopted (Locke, 2007). Accordingly, offering some research propositions is the best way to approach the study (Cooper and Schindler, 1998).
The offering of research propositions is based on a four-step process including the phases of grounding, crafting, connecting and simplifying premises, concepts and constructs (Ulaga et al., 2021).
4. Matching types of innovations and crowdfunding campaigns
To try to match the types of innovation and crowdfunding campaigns, it is necessary to start from the results achieved from the literature reviews carried out before. In order to facilitate the reading of results, they are included in Table 2.
To proceed systematically, attention is focused on types of innovation first. Satell (2017) defines two parameters to classify them and this gives us a clear overview of the differences between them. Definitions of crowdfunding campaigns, instead, are not compared/comparable and so by focusing attention on them some difficulties could arise. According to the above, crowdfunding campaigns are recalled and interpreted in the light of parameters determining types of innovation. This allows matching types of innovation with crowdfunding campaigns and – in turn – catching the differences between crowdfunding campaigns by leveraging the parameters proposed by Satell (2017). The main scheme to refer to is Table 1.
For a start, attention is addressed toward equity crowdfunding (Ahlers et al., 2015; Vulkan et al., 2016; Walthoff-Borm et al., 2018; Mochkabadi and Volkmann, 2020). As mentioned above, equity crowdfunding consists in selling a stake of a new project/business to a number of investors in return for investment (Vismara, 2018; Ralcheva and Roosenboom, 2020; Cumming et al., 2021). People financing equity crowdfunding campaigns act as kind of expert financiers who speculate on entrepreneurial uncertainty and the related risk (Wu and Knott, 2006; Hmieleski and Baron, 2008; Audretsch and Belitski, 2021). In order to clarify what is properly meant by entrepreneurial risk and uncertainty, it is appropriate to recall Knight's contribution (1921). The scholar talks about three kinds of uncertainty. The first kind of uncertainty is referable to “a future whose distribution exists and is known”. All the events, which are expected to happen in the future, are already known so the individual can easily reduce this kind of uncertainty through diversification. Entrepreneurs can evaluate different scenarios and foresee all possible events. Accordingly, this kind of uncertainty is very easy to reduce. The second kind of uncertainty is generated by “a future whose distribution exists but is not known in advance”. This kind of uncertainty is due to the fact that future events can be hypothesized after several trials but they can never be formalized clearly. In this case, managing and reducing uncertainty is not easy. Entrepreneurs are not supposed to foresee what is going to happen and so all the changes are seen as if they would happen for the first time. The third kind of uncertainty, the most difficult one to face, is the one that Knight explicitly calls “true uncertainty”. It is referred to a future that is unknown and unknowable. The only reason why an entrepreneur decides to bear this uncertainty is that they expect to earn entrepreneurial profits. Taking for granted the idea that people financing equity crowdfunding campaigns are willing to fully bear the risk, handling true entrepreneurial uncertainty and risk, it seems reasonable to exclude that they can be interested in sustaining/incremental innovation since it is the result of a well-defined problem and of a well-defined skill domain. Uncertainty, in this case, is reduced to its minimum. By reverse, people financing equity crowdfunding campaigns are expected to be very interested in projects focused on basic research and – at the same time – they are expected to be also interested in entrepreneurial projects disclosing breakthrough and disruptive innovation (see Table 3 where the darker gray indicates the first choice; the lighter gray indicates the second choice). Following the above premises, it is reasonable to formulate the first research proposition:
Equity crowdfunding campaigns are used to finance entrepreneurial projects aiming to support basic research first, then breakthrough and disruptive innovation.
At this stage, attention can be focused on reward campaigns. They consist of the crowd supporting a project/business with the expectation of receiving a non-financial reward in return, such as goods or services at a later stage (Cholakova and Clarysse, 2015; Kraus et al., 2016; Shneor and Munim, 2019). A common example is a project or business offering a unique service (rewards) or a new product (pre-selling) in return for investment (Frydrych et al., 2014; Nielsen and Binder, 2021). In this case of crowdfunding campaign, the concepts of entrepreneurial uncertainty and risk (Knight, 1921) are not fully considered. People financing reward-based crowdfunding campaigns know exactly what they are going to finance and – above all – they expressly like what the project/business is going to offer on the market. By recalling the classification of types of innovation proposed by Satell (2017), it sounds realistic to assume that people financing reward-based crowdfunding campaigns are very interested in the skill domain (which needs to be well defined) since they offer financial support to get something they want/need and so they are expected to be very interested in projects focused on sustaining/incremental and disruptive innovation (see Table 4 where the gray indicates the choice of the crowd). Following the above premises, it is reasonable to formulate the second research proposition:
Reward-based crowdfunding campaigns are used to finance ideas and projects aiming to support sustaining/incremental and disruptive innovation.
After analyzing reward campaigns, attention can be addressed to donation campaigns. As already said, this is a classic type of online donation, in which the crowd selflessly donates money to support a project/business (Meyskens and Bird, 2015). The most important aspect is that the crowd does not receive any reward in return (instead the crowd has a specific reward both in equity- and reward-based campaigns). In some cases, the reward can be symbolic, often intangible (Cason and Zubrickas, 2019). Before trying to match the types of innovation and the types of crowdfunding campaigns, a specification is needed. The “problem” Satell (2017) talks about in its classification, is not a problem meant as an impediment, an obstacle, or even a disease to face. Satell (2017) talks about the problem meant as an area of interest/research, at a broader level. This clarification is mandatory to avoid any possible misunderstanding since – as we will see – the concepts end by overlapping somehow. People financing donation crowdfunding campaigns support projects concerning a specific area of research (this is not necessarily a medical area). The area of interest/research is very important for people donating their resources. By recalling the classification of types of innovation proposed by Satell (2017), it sounds realistic to assume that people financing donation crowdfunding campaigns are very interested in the problem or – to be more precise – in the area of interest/research (which needs to be well defined) and so they are expected to be very interested in projects focused on breakthrough and disruptive innovation (see Table 5 where the gray indicates the choice of the crowd). Following the above premises, it is reasonable to formulate the third research proposition:
Donation crowdfunding campaigns are used to finance projects aiming to support breakthrough and disruptive innovation.
The last type of crowdfunding campaign is the lending one. Lending crowdfunding stands for a direct alternative to a bank loan with the difference that, instead of borrowing from a single source, projects/businesses can borrow money directly from the crowd. As shown before, crowdlenders often bid for loans by offering an interest rate at which they would lend. Borrowers then accept loan offers at the lowest interest rate. Internet-based platforms are used to match lenders with borrowers. Due diligence is carried out for each loan request, as crowdfunding platforms have to protect both businesses and investor interests. Platforms normally require financial accounts and a trading track record (Morse, 2015; Moysidou and Hausberg, 2020; Bernardino and Santos, 2021). In this case, the concept of entrepreneurial uncertainty and risk (Knight, 1921) needs to be recalled but the approach is different. People financing lending crowdfunding act like a bank. According to the principles of banking (McNelis and Yoshino, 2018; Miglo, 2022), they know they have to face uncertainty and risk, but they try to reduce it since they are investing their money in that project/business. By recalling the classification of types of innovation proposed by Satell (2017), it sounds realistic to assume that people financing lending crowdfunding campaigns are very interested in reducing the risk (Nisar et al., 2020). Thus, the crowd is expected to exclude basic research since it is the result of a not well defined problem and of a not well defined skill domain. Uncertainty, in this case, reaches its peak. By reverse, people financing lending crowdfunding campaigns are expected to be very interested in projects focused on sustaining/incremental innovation and – at the same time – they are expected to be also interested in research projects disclosing breakthrough and disruptive innovation (see Table 6 where the darker gray indicates the first choice; the lighter gray indicates the second choice). Following the above premises, it is reasonable to formulate the fourth research proposition:
Lending crowdfunding campaigns are used to finance projects/businesses aiming to support sustaining/incremental innovation first, then breakthrough and disruptive innovation.
All the four propositions matching types of innovation with types of crowdfunding campaigns are shown in Table 7.
5. Discussion
The present paper has offered four research propositions trying to combine types of innovation and types of crowdfunding campaigns. This relationship has been examined in terms of the influence/support that crowdfunding offers to innovation (Stanko and Henard, 2016, 2017; Hervé and Schwienbacher, 2018; Brem et al., 2019) by compelling scholars to wonder if and to what extent crowdfunding can democratize (Mollick and Robb, 2016; Stevenson et al., 2019) or foster innovation (Wachs and Vedres, 2021).
In reference to the above premises, two main conjectures can derive. First, a match, a relationship between types of innovation and types of crowdfunding campaigns can be hypothesized. According to the above reasoning equity crowdfunding campaigns might be useful to finance entrepreneurial projects aiming to support basic research first, then breakthrough and disruptive innovation. Reward-based crowdfunding campaigns might be used to finance ideas and projects aiming to support sustaining/incremental and disruptive innovation. Donation crowdfunding campaigns might be used to finance projects aiming to support breakthrough and disruptive innovation. Eventually, lending crowdfunding campaigns might be used to finance projects/businesses aiming to support sustaining/incremental innovation first, then breakthrough and disruptive innovation. The above combinations (which are hypothesized, but are not verified yet) are not able to identify unique matches (one-to-one) but by excluding some alternatives they are in the position to drive attention only toward some of them. In other words, these combinations allow hypothesizing that each type of crowdfunding cannot support all types of innovation. This is an intriguing result that is worth investigating.
Second, by matching types of crowdfunding with types of innovation (again, propositions are offered; they are not verified yet), crowdfunding is expected to foster innovation. By corroborating the idea of matching innovation and crowdfunding, the main result that can derive is a clearer overview of the paths (i.e. crowdfunding) to support innovation. By paying more attention to the problem or the skill domain or by paying the same attention to both, results can be expected in advance. In other words, by orienting their involvement in one type of crowdfunding or another, people in the crowd can know in advance the expected output. This is a very important aspect that can foster innovation.
The third and last conjecture deals with the democratization of innovation. For sure the match between types of crowdfunding and types of innovation supports the process of democratization in the sense of greater participation by the crowd (Mollick and Robb, 2016; Stevenson et al., 2019). Conversely, this match seems to hinder this process if meant as the possibility to access all the new projects/businesses. By assuming that if the crowd is interested in one type of crowdfunding then some types of innovation are supported, then the process becomes selective, not democratic to a wider extent. It seems interesting to note that this approach recalls the real options theory (Huchzermeier and Loch, 2001; Aguerrevere, 2003) and the path dependence (David, 1985; Arthur, 1988) that reduce options (new projects/businesses) instead of increasing them.
6. Limitations, implications and conclusions
At this stage, before concluding, the main limitations of the paper and the major implications for the crowd, the aspiring entrepreneurs and the managers of platforms need to be underlined.
6.1 Main limitations
The present paper has tried to fill in the research gap concerning the relationship between the types of crowdfunding campaigns (Satell, 2017) and the types of innovation (Song et al., 2020) and – in particular – the missing match between them. The paper offers four research propositions that are not verified empirically. Accordingly, they still need to be discussed, revised and modified before proceeding.
The main limitations deal with the literature review and – above all – with the methodology. About the literature review, it is appropriate to remark that the streams of research considered at the beginning of the paper (see sections 2.1 and 2.2) have driven the above results. By considering different strands of research, wider results might have come out. Accordingly, by conducting a more extensive literature review, deeper results might be presented. The second limitation deals with methodology. There is no particular methodology that can be used to explain overlaps between different fields of knowledge and to manage these overlaps perfectly. Despite a consistent effort and a careful approach, and the reference to a specific process driving to the formulation of research propositions (Ulaga et al., 2021), both theoretical and empirical perspectives need to be considered to develop a new theory (Kuhn, 1970): this might be the basis for future researches.
After highlighting the main limitations of the paper, the major implications for the crowd, the aspiring entrepreneurs, the managers of platforms and the scholars can be remarked.
6.2 Implications
For a start, conjectured propositions can have major implications for the crowd. The crowd is the leading actor in crowdfunding campaigns since it determines their success or failure. Overall, if the crowd can match in advance the types of innovation with the types of crowdfunding, many problems of information asymmetry could be eliminated or handled in a proper way (Dierkens, 1991; Aboody and Lev, 2000; Lambert et al., 2012; Song et al., 2021). By relying on the above propositions the crowd gets aware of the means-end relationship in advance or, put simply, the crowd knows what they are going to finance through a kind of campaign. This is a relevant implication that can increase the participation of the crowd and foster their involvement in the search for the most relevant projects to finance.
At the same time, the above propositions have major implications for the managers of crowdfunding platforms (Coakley et al., 2021; Taeuscher et al., 2021). If – as already said above – the proposition could help the crowd to find the most interesting projects to finance, then managers of crowdfunding platforms could leverage the same propositions to select projects/businesses in terms of crowdfunding campaign and of innovation (Rietveld and Schilling, 2021). A more fine-grained selection of projects to be uploaded and presented on crowdfunding platforms could be useful to manage dedicated platforms properly and more efficiently.
Eventually, the above propositions have also major implications for aspiring entrepreneurs who candidate their new projects/business on dedicated platforms (Junge et al., 2021). Should the above propositions be valid then aspiring entrepreneurs could know in advance which types of crowdfunding campaigns could be more useful to finance their projects/business ideas and – contemporarily – which platform could be more useful for this aim.
Overall, by considering the implications for the crowd, aspiring entrepreneurs and managers of platforms at the same time, it seems reasonable to assume that all the crowdfunding processes could be more efficient since the seek for new projects/business ideas to finance could be more targeted. A result like this could be very useful since the amount of new projects/business ideas that aspiring entrepreneurs would like to get financed by the crowd is increasing consistently and the seek for information about crowdfunding campaigns is getting more and more difficult.
Of course, the present study has some implications for scholars as well. Research propositions may be confirmed, modified, or accepted. Scholars are invited to review the streams of literature focused on innovation and crowdfunding in order to find out new possible overlaps and investigate them. For sure, the relevance that both topics are assuming encourages scholars to investigate them. After assessing the theoretical closeness/distance between innovation and crowdfunding, scholars are expected to carry out empirical tests that can give robust results and confirm or deny the match between the types of innovation and the crowdfunding campaigns. In both cases, scholars worldwide are heartily evoked to contribute to the enlargement and enrichment of this area of research.
The present paper has offered four research propositions aiming to match the types of innovation (breakthrough, sustaining/incremental, disruptive and basic research) and the types of crowdfunding campaigns (equity, reward, donation and lending). Even if the research propositions are not empirically tested and verified – actually they are still in fieri and possibly subject to changes – they are useful to shed new light on a stream of research that combines innovation and crowdfunding and corroborates the relevance of interdisciplinarity in management studies.
Types of innovation
| The skill domain needed to solve the problem is NOT well defined or not | The skill domain needed to solve the problem is well defined | |
|---|---|---|
| The problem is well defined | Breakthrough innovation | Sustaining/incremental innovation |
| The problem is NOT well defined | Basic research | Disruptive innovation |
Source(s): Authors' adaptation from Satell (2017)
The results of literature reviews about innovation and crowdfunding
| Portfolio of innovation | Types of crowdfunding campaigns |
|---|---|
| Breakthrough innovations | Equity |
| Sustaining/incremental innovations | Reward |
| Disruptive innovations | Donation |
| Basic research | Lending |
Source(s): Authors' own elaboration
Matching equity crowdfunding and innovation
| The skill domain needed to solve the problem is NOT well defined or not | The skill domain needed to solve the problem is well defined | |
|---|---|---|
| The problem is well defined | Breakthrough innovation | Sustaining/incremental innovation |
| The problem is NOT well defined | Basic research | Disruptive innovation |
Note(s): The darker gray cell indicates the first choice; the lighter gray cells indicate the second choice
Source(s): Authors' own elaboration
Matching reward crowdfunding and innovation
| The skill domain needed to solve the problem is NOT well defined or not | The skill domain needed to solve the problem is well defined | |
|---|---|---|
| The problem is well defined | Breakthrough innovation | Sustaining/incremental innovation |
| The problem is NOT well defined | Basic research | Disruptive innovation |
Note(s): Gray cells indicate the crowd's choice
Source(s): Authors' own elaboration
Matching donation crowdfunding and innovation
| The skill domain needed to solve the problem is NOT well defined or not | The skill domain needed to solve the problem is well defined | |
|---|---|---|
| The problem is well defined | Breakthrough innovation | Sustaining/incremental innovation |
| The problem is NOT well defined | Basic research | Disruptive innovation |
Note(s): Gray cells indicate the crowd's choice
Source(s): Authors' own elaboration
Matching lending crowdfunding and innovation
| The skill domain needed to solve the problem is NOT well defined or not | The skill domain needed to solve the problem is well defined | |
|---|---|---|
| The problem is well defined | Breakthrough innovation | Sustaining/incremental innovation |
| The problem is NOT well defined | Basic research | Disruptive innovation |
Note(s): The darker gray cell indicates the first choice; the lighter gray cells indicate the second choice
Source(s): Authors' own elaboration
Research propositions matching innovation and crowdfunding
| P1: Equity crowdfunding campaigns are used to finance entrepreneurial projects aiming to support basic research first, then breakthrough and disruptive innovation |
| P2: Reward-based crowdfunding campaigns are used to finance ideas and projects aiming to support sustaining/incremental and disruptive innovation |
| P3: Donation crowdfunding campaigns are used to finance projects/businesses aiming to support breakthrough and disruptive innovation |
| P4: Lending crowdfunding campaigns are used to finance entrepreneurial projects aiming to support sustaining/incremental innovation first, then breakthrough and disruptive innovation |
Source(s): Authors' own elaboration
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