Quality Signals in Participative Financing – How Crowdfunding Supports Economically Viable and Sustainable Ventures

Sven Siebeneicher

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Participative financing, in terms of crowdfunding and crowdinvesting, has the potential to contribute to the sustainable development of society. The effectiveness of participative financing for sustainable development depends on the success of individual financing campaigns. Trust is a crucial factor for the success of campaigns. In addition, the campaigns’ contribution to sustainable development and whether it is economically viable are decisive factors. Based on these three criteria, this dissertation investigates quality signals for increasing the supporters’ trust in campaigns. The dissertation investigates to what extent participative financing can contribute to sustainable development and support the development of economically viable ventures. To this end, the dissertation considers four independent studies. The dissertation shows that the ventures’ sustainable and personal value proposition is a quality signal that positively influences the success of the associated campaigns. Supporters of reward-based crowdfunding campaigns are even willing to reduce their personal value in order to contribute to achieving higher sustainable values. Furthermore, the dissertation shows that in the context of lending- and equity-based crowdfunding, sustainable orientation has no effect on the campaigns’ success but positively influences the profitability of ventures. Sustainable orientation positively affects profitability, since the success of sustainably oriented campaigns is almost independent of the interest rate and these ventures can acquire capital at economically more favorable conditions compared to regular ventures. The inclusion of society in sustainable transformation processes is an essential requirement in the Sustainable Development Goals of the United Nations. The opportunities for societal participation could be increasable if established companies integrate participative financing techniques into existing products. A hybrid model could leverage the advantages of established and innovative financing techniques. The dissertation shows that decision-makers of regional banks are willing to offer a hybrid model of participative co-financing. However, it also becomes clear that further tests and experiences regarding the integration of participative financing are necessary to advance the understanding of the potential of participative financing. Finally, the dissertation shows that social interactions in the communities of participative financing platforms have a trust-building effect. Platform participants can exchange information about the ventures’ qualities through interactions, which increases the willingness to participate.

Date: 2023
New Economics Papers: this item is included in nep-des, nep-env and nep-pay
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