Crowdfunding Small Businesses and Startups: A Systematic Review, an Appraisal of Theoretical Insights and Future Research Directions

Abstract

Purpose: This contribution evaluates key theoretical bases that were used in previous research, to investigate the use of crowdfunding platforms by small businesses and startups. It presents the findings from a systematic review to better explain the pros and cons of utilizing these disruptive technologies for crowdsourcing or crowd-investing purposes.

Method: The researchers adopt PRISMA’s methodical protocol to search, screen, extract and scrutinize seventy-two (72) articles that were indexed in both Scopus and Web of Science. They examine their research questions, describe their methodologies. Afterwards, they synthesize the findings from previous literature, outline the implications of this contribution and discuss about future research avenues.

Findings: A thorough review of the relevant literature suggests that there are opportunities as well as challenges for project initiators as well as for crowd-investors, if they are considering equity crowdfunding, peer-to-peer (P2P) lending and rewards-based crowdfunding platforms, among others, to raise awareness about their projects, and to access finance from crowd-investors.

Research limitations/implications: Further research is required on this timely topic. There are a number of theories relating to technology adoption and/or innovation management, strategic management, accounting and financial reporting, and normative/business ethics, among other research areas, that can be utilized as theoretical bases, to explore this topic.

Practical implications: Crowd-investors are striving in their endeavors to find a trade-off between potential rewards and a number of risks that are associated with crowd-financing.

Originality: Currently, there are few systematic reviews and conceptual articles focused on the crowdfunding of small businesses and startups. Hence this contribution closes this gap in the academic literature. Moreover, it links the extant theory to practice. It clarifies that the resource-based view theory of the firm, the theory of planned behavior, the diffusion of innovations theory, as well as the signaling theory, among other conceptual frameworks, can be used to investigate different facets of crowdfunding/crowdsourcing and crowd-investing.

Keywords: crowdfunding, crowd sourcing, crowd-investing, resource-based view, diffusion of innovations, signaling theory.

JEL Classification: G3, G11, G15, G21, G23, G24, L26, M13, M16, M21