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What impact does equity crowdfunding have on SME innovation and growth? An empirical study

What impact does equity crowdfunding have on SME innovation and growth? An empirical study
What impact does equity crowdfunding have on SME innovation and growth? An empirical study

We examine the impact of equity crowdfunding on innovation and growth opportunity within small- and medium-sized enterprises. While previous studies have generally focused on the realm of crowdfunding and how it can close the financing gap for small firms, recent academic attention has turned toward assessing the outcome of equity crowdfunding, measured in terms of successes (or failures) in post-campaign firm financing. Using data from Fame BVD for small firms operating in the UK, we investigate whether equity crowdfunding can act as a catalyst for innovation and growth. The findings show that crowdfunding does not have a significant influence on innovation in small firms, thereby disproving the proposition that the use of crowdfunding leads to an increase in innovation. Nonetheless, crowdfunding does have an impact on the growth opportunity of small firms, with a strong positive correlation. Our further tests on return on assets models and propensity score and controlled firm-matching models show a positive impact of crowdfunding on small firms’ performance. We also discuss the implications of our findings for small firms’ use of equity crowdfunding for business growth opportunities.

Equity crowdfunding, Growth opportunity, Innovation, Performance, Small- and medium-sized enterprises
0921-898X
105-120
Eldridge, Derek
65d8146e-873b-45c4-a7e2-8ad1b663c9e0
Nisar, Tahir M.
6b1513b5-23d1-4151-8dd2-9f6eaa6ea3a6
Torchia, Mariateresa
ca48f74b-a903-437e-b152-711b52bcf27e
Eldridge, Derek
65d8146e-873b-45c4-a7e2-8ad1b663c9e0
Nisar, Tahir M.
6b1513b5-23d1-4151-8dd2-9f6eaa6ea3a6
Torchia, Mariateresa
ca48f74b-a903-437e-b152-711b52bcf27e

Eldridge, Derek, Nisar, Tahir M. and Torchia, Mariateresa (2019) What impact does equity crowdfunding have on SME innovation and growth? An empirical study. Small Business Economics, 56 (1), 105-120. (doi:10.1007/s11187-019-00210-4).

Record type: Article

Abstract

We examine the impact of equity crowdfunding on innovation and growth opportunity within small- and medium-sized enterprises. While previous studies have generally focused on the realm of crowdfunding and how it can close the financing gap for small firms, recent academic attention has turned toward assessing the outcome of equity crowdfunding, measured in terms of successes (or failures) in post-campaign firm financing. Using data from Fame BVD for small firms operating in the UK, we investigate whether equity crowdfunding can act as a catalyst for innovation and growth. The findings show that crowdfunding does not have a significant influence on innovation in small firms, thereby disproving the proposition that the use of crowdfunding leads to an increase in innovation. Nonetheless, crowdfunding does have an impact on the growth opportunity of small firms, with a strong positive correlation. Our further tests on return on assets models and propensity score and controlled firm-matching models show a positive impact of crowdfunding on small firms’ performance. We also discuss the implications of our findings for small firms’ use of equity crowdfunding for business growth opportunities.

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Accepted/In Press date: 14 May 2019
e-pub ahead of print date: 11 June 2019
Keywords: Equity crowdfunding, Growth opportunity, Innovation, Performance, Small- and medium-sized enterprises

Identifiers

Local EPrints ID: 432071
URI: http://eprints.soton.ac.uk/id/eprint/432071
ISSN: 0921-898X
PURE UUID: aaac7f26-f606-4edb-abf6-ffe678bc349c
ORCID for Tahir M. Nisar: ORCID iD orcid.org/0000-0003-2240-5327

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Date deposited: 01 Jul 2019 16:30
Last modified: 06 Jun 2024 01:39

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Contributors

Author: Derek Eldridge
Author: Tahir M. Nisar ORCID iD
Author: Mariateresa Torchia

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