BUSINESS MODEL INNOVATION

Crowdfunding as a funding tool for the growth of social enterprises

Antonio Minguzzi Michele Modina Stefano Filomeni Marilena Bredice

Objective. The present research-in-progress explores whether social crowdfunding triggers the success of social projects. Technically, crowdfunding refers to the practice of raising funds for a venture or project from a large audience of investors, generally using the Internet as a channel of operation. Crowdfunding initiatives may vary from new venture creation or product development initiatives that seek financial investment to social causes that seek donations. The second category is the one we focus on in our analysis. Indeed, the mechanisms of social crowdfunding and antecedents of success have not been widely investigated and are not well understood (Barnett, 2015; Bruton et al. 2015; Mollick, 2014; Ahlers et al. 2015).

Specifically, we investigate this by focusing on the role played by an Italian social crowdfunding platform, Meridonare, owned by a banking foundation. The aim of Meridonare is to support all meritorious and innovative social, cultural and civic ideas and projects that promote the culture of philanthropic contributions, the sense of community and the creation of strong and cohesive social ties focusing on the resources, talents, and unlimited potential of Southern Italy, where the banking foundation is located (Presenza et al. 2019).

Examining 140 projects hosted between 2016 and 2018, our study analyzes how the platform acts in enhancing and facilitating the interaction between non-profit organizations (NPOs) and private investors willing to participate in the financing of innovative social projects. Using a unique and proprietary database, we examine whether the characteristics of community involvement (“human touch”), the implementation of promotional actions, and the level of collaboration between crowdfunders and the platform are critical determinants of crowdfunding success. While the role of local community in traditional venture funding is probably less critical, it plays a much more central role in social crowdfunding. In fact, whether defined geographically or virtually, the community of stakeholders on which the crowdfunding social project relies is its primary source of funding. Similarly, the intervention of a crowdfunding platform in promoting the projects with targeted actions could play a key role in the success of fundraising campaign.

We explore these relations by considering three initial assumptions. According to the first hypotesis (H1) the success of a social crowdfunding campaign is positively related to the degree to which its goals align with the local community involvement. For the second assumption (H2) the success of a social crowdfunding campaign is positively correlated to the degree of effectiveness of the campaign’s promotion and support actions. As a third hypothesis (H3) we investigate whether the success of a crowdfunding campaign is positively associated with the degree of effectiveness of the collaboration between the promoters and the platform.

#Crowdfunding platform #entrepreneurial social finance #social enterprise #social entrepreneurial opportunities #social innovation