Crowdfunding – the Interplay between Evolving Organization and Embedding Institutions

Lissowska Maria ()
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Lissowska Maria: Warsaw School of Economics, Warsaw, Poland, European Commission, Brussels, Belgium

Accounting, Economics, and Law: A Convivium, 2021, vol. 11, issue 3, 20

Abstract: This paper explains the functioning of economic crowdfunding (equity- and loan-based). One of the angles from which crowdfunding can be analysed is institutional economics. Namely, it can be studied as a case where the spontaneous evolution of contractual forms is difficult and the need for legislative intervention arises. The paper explains the divergence of interests and risks of three groups of agents involved (platforms, fundraisers and funders). The radical asymmetry of power, to the advantage of the platform, is inherent in this type of business. The spontaneous development of strategies by the platforms (pricing and some non-price strategies relating to fundraisers) and recent developments in the direction of automatic decisions taken by the platform instead of funders, promotes the development of the crowdfunding business, but it does not ensure protection from risk of other parties. Still, the major source of risk for funders and partly also for fundraisers is the absence of liability of the platforms themselves. In these conditions, the spontaneous move towards the better alignment of the interests of parties seems unfeasible and external regulation is necessary.

Keywords: crowdfunding; two-sided markets; asymmetry of information; institutional arrangements (search for similar items in EconPapers)
JEL-codes: D02 D82 D85 G23 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/ael-2017-0032

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