Digital Transformation in Financial Intermediation: Three Studies in the Crowdfunding Domain

金融中介數字化轉型︰三項在眾籌領域中的研究

Student thesis: Doctoral Thesis

View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Awarding Institution
Supervisors/Advisors
Award date21 Jun 2017

Abstract

Crowdfunding as a Digital Transformation in Traditional Financial Intermediary
The role of information technology has shifted dramatically, during the last few years, from supporting efficiency and productivity into radically transforming all aspects of business and social life. Crowdfunding is one of the most emerging examples of digital transformation in the classical financial intermediation. Crowdfunding as a new model of finance refers to the practice of funding a project, cause or venture by raising money/requesting contributions from a large number of people (i.e. the crowd), typically via the internet. In this new model, funding activities are no longer restricted to conventional financial institutions such as banks, venture capitalists or business angels but are now open to the public (i.e. the crowd). So that, anybody can participate according to his/her individual financial and mental capabilities (Haas et al. 2014). While the phenomenon of collective finance is not new by itself, as projects or ideas were funded in the past by open calls (Harris 1985), the advancement of digital technologies has boosted up both the scope and the potential of the phenomenon (Belleflamme et al. 2013). Internet in general and Web 2.0 technology in particular play an essential role in facilitating crowdfunding by providing the digital platforms that facilitate the interaction and communication between fund seekers and the crowd to achieve the desired outcome (Danmayr 2014).

The novelty and convenience of online crowdfunding as a new digitally enabled model of financial intermediation have led to the dramatic increase in the number of online crowdfunding platforms which respond to the needs raised by different markets. Global crowdfunding market experienced significant accelerated growth during the last few years, expanding from $6.1 billion raised in 2013 to reach $16.2 billion raised in 2014, with 167% growth rate. In 2015, the industry is set to more than double once again, on its way to raising $34.4 billion on more than 1,200 active crowdfunding platforms in 2015 (Massolution 2013, 2015).

The Aim of This Thesis
In responding to this emerging phenomenon (i.e. crowdfunding), the work in this thesis consists of three studies which answer three different research questions, in the domain of crowdfunding, from two distinct research perspectives. The first one is the data management and integration perspective, while the second one is the business and data analytics perspective. The order of the three studies reflects the knowledge building and academic development process which I went through while formulating and answering the different research questions in this thesis.

The Data Management Perspective
Crowdfunding data is increasing significantly due to the large number of crowdfunding platforms going online. This increase raises serious challenges to the data integration and management in the crowdfunding domain. Little attention has been given to address these challenges in the literature.

The first study in this thesis proposes a standard crowdfunding data model as a solution. To develop the model, design science approach is used as the broader framework that organizes our efforts (i.e. identifying the problem, searching for a solution, and evaluating the solution). However, in the process of searching for the solution, a theory based, grounded, bottom-up approach is then infused into the broader design science framework in a nested way to lead the solution development process. Third generation activity theory is also used as a framework to guide the data model development supported by theories from the two-sided market and financial intermediation. This study introduces a new research methodology called grounded design science when proposing a new solution to an emerging business problem (i.e. a unified data model for the crowdfunding domain). The study provides practical, theoretical and methodological contributions.

This study, in addition of its academic merit, provided broad understanding of the different types of crowdfunding platforms while still as long as deep understanding of the different data items which can be used in future research designs. In addition of the academic value of this study, it provided the required base of knowledge and the first step to move to the next two studies in the thesis. Practically, gaining deep awareness about the different types of data items that can be collected from online crowdfunding platforms provided great help in designing the next two studies in this thesis.

The Business and Data Analytics Perspective
The second and third studies in this thesis take an econometric approach and focus on new emerging subgenre of crowdfunding, namely civic crowdfunding. These two studies focus on an interesting business problem, but from a perspective which is different from the one which was followed in the first study. The first study approaches the crowdfunding phenomenon from the data management and integration perspective while the second and third studies approach the crowdfunding phenomenon from the business and data analytics perspective. Both second and third studies in this thesis focus on predicting civic crowdfunding project success.

The second study takes an exploratory approach and empirically investigates the predictors of civic crowdfunding projects success by applying discriminant analysis to data collected from one of the most popular civic specific crowdfunding platforms. Civic crowdfunding is emerging as a new model of raising fund from the crowd to support projects aiming at delivering goods that can be utilized by the public. While all crowdfunding types share the same concept of soliciting fund from the crowd, some characteristics make civic crowdfunding different. The aim of this study is to empirically identify the key predictors of civic crowdfunding projects success. To do that, the study analyzes 308 civic crowdfunding projects divided almost evenly between success and failure on one of the most popular civic specific crowdfunding platforms. The findings reveal that utilizing online community of consumption to target relevant potential funders and inducing online engagement are the most important predictors of civic crowdfunding projects. While many studies have addressed issues related to crowdfunding in general, this study is the first one to give empirical evidence about the key predictors of civic crowdfunding projects success in particular.

The third study takes the research a step further by investigating the role of initial third party endorsement, in the form of organizational funds, on civic crowdfunding project success. Civic crowdfunding is an emerging subgenre of crowdfunding whereby citizens contribute to financing civic projects which are thought to bring value to the community. Civic crowdfunding projects can range from community educational programs to transportation improvement and environmental enhancement programs. Crowdfunding is already known for its pivotal role in mobilizing the crowd to fund several types of projects. Civic crowdfunding, dealing with the financing of public goods, involves the use of financial contributions from several types of stakeholders, including individual citizens as well as established organizations such as government, businesses, or NGOs. To the best of our knowledge, no existing empirical research addresses how initial contributions from established organizations can impact civic crowdfunding success. In this study, we aim to understand the role of initial endorsements, in the form of early organizational funds, in determining the success of civic crowdfunding projects. Our data highlights that initial endorsements from established organizations increase the odds ratio of success for civic crowdfunding projects. Our findings also show that this impact is mediated by the average amount per pledge provided to the project after receiving the initial endorsement. The findings further illustrate that this impact is moderated by the type of endorsing organizations, such that endorsements provided by NGOs are increasing civic crowdfunding project success while endorsements provided by business or government organizations don’t have any significant impact.