Panel Paper: Does Crowdfunding Benefit Social Entrepreneurship?

Thursday, November 8, 2018
8222 - Lobby Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Wendy D. Chen, George Mason University

Compared to profit-oriented commercial firms, social enterprises/non-profits have been found to have a harder time obtaining financial resources (Austin et al. 2006; Calic et al., 2016). While social enterprises may not appear appealing to commercial lenders or investors due to their business structures, the various social causes they try to promote are usually supported by the public. Under these circumstances, more and more crowdfunding platforms in either the hybrid funding form, which includes both commercial and community projects such as Indiegogo, or purely community-based projects (e.g. Kiva) have mushroomed over the last decade. While multiple reports expressed optimism that crowdfunding would greatly enhance entrepreneurship, scholarly knowledge about the impact that the crowdfunding model has on social entrepreneurship remains quite limited. In addition, it is also not clear what role public policy should play in helping to facilitate funding for projects with social causes.

In this study, we focus on Indiegogo as a case study. We first retrieved data by using the web-crawling technique from the Indiegogo website. We carefully recorded each project in detail including its category, main campaign message, whether it was successfully funded or not, etc. The study finds that commercial projects led by new technological products have higher support rates than community-based projects. In other words, projects with social causes do not have as much support as commercial projects on the crowdfunding platform. We then randomly selected 100 community projects from the dataset and used textual analysis to look into their fund-raising campaigns in detail. The study finds that friends and families’ initial investment in the crowdfunding plays a critical role in determining whether the fund-raising will be successful or not. Put differently, it may be more challenging for people with lower social economic status to accomplish their projects with social causes. This paper ends with clear policy implications.