The Power of Crowdfunding in SMEs: Driving Innovation, Engaging Stakeholders, and Validating Market Demand

Muhammed Zakir Hossain, Annatul Islam Hredoy and Md. Jobaer Rahman Rashid
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Muhammed Zakir Hossain: Associate Professor, Department of Business Studies, State University of Bangladesh, Bangladesh
Annatul Islam Hredoy: Carlson School of Management, University of Minnesota, Minneapolis, MN 55454, USA.
Md. Jobaer Rahman Rashid: Humphrey School of Public Affairs, University of Minnesota, USA

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Abstract: Crowdfunding has emerged as a pivotal financing method, providing Small and Medium Enterprises (SMEs) with unique avenues to secure funding, stimulate innovation, and engage with stakeholders. This investigation examines the influence of crowdfunding on the innovation of Small and Medium-Sized Enterprises (SMEs), emphasizing its role in overcoming financial obstacles, confirming market demand, and fostering collaborative networks. The study utilized a mixed-methods approach, analyzing data from 200 crowdfunding campaigns and conducting qualitative interviews with 30 small and medium-sized enterprise owners and 10 experts. The results indicate that increased funding levels and proactive involvement from backers significantly improve innovation outcomes, including product introductions, patent registrations, and revenue growth. Furthermore, crowdfunding serves as a mechanism for validating market demand and fostering creative exploration, enabling small and medium-sized enterprises to refine their products and explore innovative concepts. The investigation highlights crowdfunding as a pivotal mechanism for promoting innovation and offers actionable insights for SMEs, policymakers, and relevant stakeholders. Future studies should investigate sector-specific dynamics and the enduring impacts of crowdfunding on innovation ecosystems.

Keywords: Entrepreneurial Ecosystems; Alternative Finance; Stakeholder Engagement; Market Validation; SME Innovation; Crowdfunding (search for similar items in EconPapers)
Date: 2025-10-31
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Published in European Journal of Applied Science, Engineering and Technology, 2025, 3 (5), pp.228-240. ⟨10.59324/ejaset.2025.3(5).19⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05736401

DOI: 10.59324/ejaset.2025.3(5).19

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