Risk-reducing options in crowdinvesting: An experimental study

Authors

  • Martin Angerer University of Liechtenstein
  • Thomas Niemand Technical University of Clausthal
  • Sascha Kraus ESCE International Business School
  • Ferdinand Thies University of Liechtenstein

Abstract

Financial constraints are a striking difficulty of entrepreneurial ventures in the early stages of their development. Recently, emerging crowdinvesting platforms try to fill this finance gap by involving an anonymous crowd into the funding process. Due to high information asymmetries, platform providers and start-ups alike try their best to reduce the risk for investors. We therefore examine existing and thinkable mechanisms of option-based risk reduction in crowdinvesting. We use a 2x3x3 mixed subject design to manipulate the availability and characteristics of risk-reducing options and the project attractiveness. With 210 participants, we are able to show that the introduction of different risk-reducing options in crowdinvesting solely favors high quality projects and increases capital concentration in a market that was originally built to make start-up funding available to a broader range of capital seekers. We also suggest reasonable prices for options and prove them to be accurate relatively to each other. Further implications for theory and practice are discussed.

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Published

2018-11-01

Issue

Vol. 28 No. 3 (2018)

Section

Articles

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How to Cite

Risk-reducing options in crowdinvesting: An experimental study. (2018). Journal of Small Business Strategy (archive Only), 28(3), 1-17. https://libjournals.mtsu.edu/index.php/jsbs/article/view/1160