In Search of Crowdfunding Business Models

In Search of Crowdfunding Business Models

Djamchid Assadi (Burgundy School of Business, France)
Copyright: © 2016 |Pages: 33
DOI: 10.4018/978-1-4666-9604-4.ch001
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Abstract

Crowdfunding platforms have substantially increased since 2005 and have supported entrepreneurial projects in response to the low propensity of banking institutions to finance either startups, or poor or young entrepreneurs. However, the theory of strategies and management of crowdfunding is far behind the dynamism of its growth. This shortcoming most likely causes costs and failures, in particular during the current state of increasing competitive pressure in the sector. This paper seeks to construct a general theoretical definition for the concept of a business model and apply it to the P2P social lending on the Internet. Extensive literature is reviewed to construct an archetype business model. The validity of the model will be tested through crowdfunding platforms.
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Introduction

Crowdfunding has significantly changed the rules of entrepreneurship, in particular in the face of the low propensity of banking institutions to finance either startups, or poor or young ventures. Since 2005, crowdfunding platforms have substantially increased. Even if the demand is far from being satisfied as seen by more than 2.5 billion financially excluded individuals, it is noticeable that competition is growing among existing platforms. Such platforms consequently need to look for competitive advantages that allow them to position themselves favorably against their competitors.

However, the theory of strategy and management of crowdfunding is far behind its rampant growth. Concepts and theoretical models have not sufficiently developed to accompany and support the crowdfunding websites’ entrepreneurs, strategists and managers. This shortcoming likely causes costs and failures, in particular due to the current state of increasing competitive pressure in the sector. The concept of a business model, despite its strategic theoretical and practical importance, is one of these concepts that suffer due to the absence of a reliable definition.

The term first appeared in the ABI/Inform database in 1975 (Zott & Amit, 2009). It became a prevalent buzzword since the emergence of the commercial Internet in the middle of 1990 (Leiner et al., 2014). The occurrence of the term in the academic papers skyrocketed since 1995. A search with the key term “business model” in Google Scholar (specialized for scholarly literature search) provides statistical evidence, as the Table 1 illustrates. For avoiding confusion and ambiguity, we searched in Google Scholar for papers that give some centrality to the concept of “business model” by putting it in the title (allintitle:“business model”).

Table 1.
Occurrence of “business model” in papers’ title, from 1990 to 2015
1990199119921993199419951996199719981999
232431726374783
2000200120022003200420052006200720082009
154199210263271267371372462603
201020112012201320142015 (up to November 6, 2015)
724743842868812724

Source: Google Scholar, checked on May 24, 2015.

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