CROWDFUNDING SUCCESS EFFECTS ON FINANCING OUTCOMES FOR STARTUPS: A SIGNALING THEORY PERSPECTIVE

Sunghan Ryu, Keongtae Kim, Jungpil Hahn

Research output: Journal PublicationArticlepeer-review

Abstract

This study adopts a signaling theory perspective to examine whether and how crowdfunding (relative to angel financing) influences subsequent venture capital (VC) investments in startups. We used a bivariate probit model with propensity score matching to address the potential endogeneity of the initial funding choice. Subsequently, we found that crowdfunded startups have a lower chance of receiving VC funding than angel-financed startups and that the effect is more negative for startups located outside of startup cluster cities. We show that corporate VCs, unlike independent VCs comprising the majority of VCs, favor crowdfunded startups. Our study contributes to the literature on crowdfunding, startup finance, and the transformative effects of IT-enabled platforms. This study further discusses the practical implications of crowdfunding in startup finance ecosystems.

Original languageEnglish
Pages (from-to)1271-1302
Number of pages32
JournalMIS Quarterly: Management Information Systems
Volume47
Issue number3
DOIs
Publication statusPublished - Sept 2023
Externally publishedYes

Keywords

  • angel
  • corporate venture capital
  • Crowdfunding
  • signaling theory
  • startup
  • venture capital

ASJC Scopus subject areas

  • Management Information Systems
  • Information Systems
  • Computer Science Applications
  • Information Systems and Management

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