Crowdfunding and Innovation System Failures

At the EU-SPRI conference in Helsinki today we present a paper that we (Annalena Wiesend and me) have jointly drafted. The investigates how crowdfunding adresses failures in the innovaiton system.

Crowdsourcing, that is the crowd as the origin of inspiration for innovation and as the source of novel solutions for given problems, has attracted some scholarly attention recently (Howe, 2006; Poetz & Schreier, 2012; Belleflamme et al., 2013). Crowdfunding, that is the crowd and its potential for micro-financing innovation has attracted some attention in the entrepreneurship, corporate finance or innovation management community as a variant of crowdsourcing (Ahlers, Cumming, Guenther, & Schweizer, 2012; e.g., Belleflamme, Lambert, & Schwienbacher, 2013; De Buysere, Gajda, Kleverlaan, & Marom, 2012; Mollick, 2013).

However, crowdfunding and the related set of actors (funders, platforms and entrepreneures) have not been analyzed in their role as contributing to a new element in the innovation system.

In this paper we explore how crowdfunding integrates in the innovation system (Freeman, 1987; Lundvall, 1992; Nelson, 1993; Metcalfe, 1994; Kuhlmann, 2001; Edquist, 2005). In particular we investigate how crowdfunding adresses failures in the innovation system, that are usually considered a rationale for governmental intervention into the system (Carlsson & Jacobsson, 1997; Klein Woolthuis et al., 2005; Chaminade & Edquist, 2010).

Based on a case study about crowdfunding in Germany and Austria and based on ten extensive interviews with platform operators and entrepreneurs from various sectors we put crowdfunding into the systems failures context. We highlight that crowdfunding indeed addresses infrastructural failures, institutional failures, interaction failures and capability failures between demand, companies and other actors.

The analysis of crowdfunding in the context of innovation systems and its failures suggests a research agenda by raising questions about the systems’ self-healing powers as crowdfunding can be interpreted as a service innovation (in a broad sense) that originates from within the system and that addresses and lives of the system failures. Additionally, new actors and new services in an innovation system that are so closely intertwined with the working of the system might give rise to other system failures which in turn have to be addressed by other actors, such as regulators etc.


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