Investigation of crowdfunding in terms of innovative SME financing in a German context

Schroff, Alexander (2018) Investigation of crowdfunding in terms of innovative SME financing in a German context. PhD thesis, University of Bolton.

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Abstract

The purpose of this mixed-methods study was to answer the following four questions: (RQ1) What is the percentage of crowdfunding in the overall funding of SMEs? (RQ2) Is there a statistically significant relationship between SMEs’ reliance on crowdfunding and SMEs’ reliance on other—that is, traditional—forms of financing? (RQ3) What is the potential impact on the traditional financing market of a shift in SME financing demand from financial institutions to crowdfunding platforms? (RQ4) In the context of crowdfunding, what are potential regulatory gaps that could lead to systematic risk? All of questions 1 and 2, and some of question 3, were quantitatively answered on the basis of data obtained from 1,000 German SMEs. Some of question 3 and all of question 4 was qualitatively answered on the basis of data from 46 experts assembled as part of a Delphi methodology. The purpose of using the Delphi methodology was to validate the regression analysis and show a proven causality of the mathematical regression. The main finding for RQ1 was that there was a statistically significant difference between technology-based SMEs’ reliance on crowdfunding as a percentage of all funding (6.41%. SD = 4.30) and non-technology-based SMEs’ reliance on crowdfunding as a percentage of all funding (3.20%. SD = 1.46), t(998) = 17.575, p < .001. The likely meaning of this finding is that technology companies are more reliant on crowdfunding. The main finding for RQ2 was that there were several insignificant negative correlations between crowdfunding and other kinds of funding. The likely meaning of this finding is that crowdfunding is actively replacing other kinds of funding; companies that have a larger portion of their funding from crowdfunding have a smaller portion of funding from other kinds of funding. The main findings for RQ3 were as follows: (a) Crowdfunding is a niche, (b) crowdfunding has a limited future, and (c) crowdfunding is having and will have a limited impact on the funding market. The integrated meaning of these findings is that the potential impact on the traditional financing market of a shift in SME financing demand from financial institutions to crowdfunding platforms is small. The main findings for RQ4 were as follows: (a) The risks of crowdfunding are well-managed by regulation, (b) the risk of crowdfunding is not important from the perspective of systemic risk, and (c) the costs and benefits of crowdfunding can be understood through the prism of encouraging investment vs protecting investors. The integrated meaning of these findings is that there are in fact some regulatory gaps, but not gaps that are associated with high levels of risk. The findings were examined in terms of game theory, de-risking, and financial inclusion. Game theory was utilized as a means of explaining how and why companies might prefer crowdfunding to other kinds of funding. De-risking and financial inclusion were utilized to explore the findings related to regulation. Companies were recommended to seek higher proportions of crowdfunding as a means of avoiding the equity demands that accompany traditional investment. Crowdfunding platforms were recommended to explore means of aggregating the investment power of their members into demands for equity.

Item Type: Thesis (PhD)
Additional Information: Electronic version of the thesis submitted in partial fulfilment of the requirements of the University of Bolton for the degree of Doctor of Philosophy. This research programme was carried out in collaboration with Amity University [IN] London
Divisions: University of Bolton Theses > Off-campus Division
Depositing User: Tracey Gill
Date Deposited: 24 May 2019 12:23
Last Modified: 24 May 2019 12:24
URI: http://ubir.bolton.ac.uk/id/eprint/2276

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