How Can SMEs Use Crowdfunding Platforms to Internationalize? The Role of Equity and Reward Crowdfunding.

Date01 Febrero 2023
AuthorTroise, Ciro

1 Introduction

Internationalization is a phenomenon that has been explored extensively over the years with a focus on both large and small/medium enterprises (SMEs). The similar international issues faced by both types of companies mean that, for them, "it is no longer possible to act in the marketplace without taking into account the risks and opportunities presented by foreign and/or global competition" (Ruzzier et al., 2006, p. 476).

In general terms, SMEs commonly need to overcome several obstacles to internationalize (e.g., a lack of financial support, partners, and legislative/regulatory prescriptions). Specifically, these criticalities are also faced by European SMEs (European Commission, 2019). In this regard, an increasing body of literature indicates that SMEs - that during the last decade have seen a remarkable development - are of major importance for European macroeconomic growth (e.g., Hervas-Oliver et al., 2021; Mateev et al., 2013). The cause of these criticalities is often identified in a cultural fragmentation that makes it difficult to provide SMEs with a uniform support suited to help them overcome the main barriers - such as a lack of knowledge, capabilities, networks/relationships, specialized personnel, and, above all, adequate resources (Singh et al., 2010). Notably, most SMEs are still tied to traditional forms of financing that do not favor internationalization and do not provide any benefits other than funds (e.g., banks and government support initiatives). Furthermore, compared with large companies, SMEs are characterized by non-negligible resource constraints (Chan et al., 2019) and, often, by a lack of experience (Lu & Beamish, 2001) and knowledge on key aspects (e.g., market strategies), which is a crucial issue for them in this field (Schweizer, 2012).

These limitations are compounded by the uncertainty and complexity that characterize the dynamic international environment (Hagen et al., 2019). This challenging and fast-changing scenario requires companies to be open (Di Pietro et al., 2018) and transformative, and to proactively adopt new technological solutions, such as digital platforms, in order to integrate their traditional competencies with digital knowledge and to develop and sustain key advantages (Schiuma et al., 2021). SMEs, which are increasingly internationalizing their activities, are now considered active players in the related processes (Ruzzier et al., 2006; Schweizer, 2012); hence, they need to embrace change and consider the adoption of new technologies as a valuable opportunity to increase their competitiveness and to foster their internationalization (e.g., Chen et al., 2019; Dabic et al., 2020; Zeng et al., 2019). Digital technologies enable faster internationalization, in particular for their recent advancements and cost reductions (e.g., Fischer & Reuber, 2011; Oviatt & McDougall, 2005; Pergelova et al., 2019). Such technologies facilitate the connection of SMEs with different stakeholders (Fischer & Reuber, 2011), increase the efficiency of information exchange (Mathews & Healy, 2008), and, according to Pergelova et al., (2019, p.14), have the potential to provide "access to international market knowledge and facilitating interactions with customers and partners", thus disclosing their function of democratizing entrepreneurship. At the same time, such powerful democratizing function plays a key role in lowering traditional market entry barriers, as it enables a multitude of diverse people to engage in international market exchanges (Aldrich, 2014; Nambisan, 2017).

Digital platforms thus have the potential to accelerate the internationalization of companies as well as their expansion and the commercialization of opportunities in foreign countries. Furthermore, it is important to underline that such platforms enable the connection of geographically dispersed entrepreneurs and investors (Maula & Lukkarinen, 2020; Nambisan et al., 2019). In particular, crowdfunding platforms have recently been established in many countries (e.g., Belleflamme et al., 2015; Kraus et al., 2016; Troise and Tani, 2021; Vrontis et al., 2021). Block et al. (2018) defined crowdfunding as a new player in the global arena, one that helps entrepreneurs in overcoming their difficulties in raising funds. Crowdfunding platforms enable entrepreneurs and firms to involve large pools of backers/investors, to connect with different people, and to raise funding from the crowd, rather than from (few) professional investors such as venture capitalists (VCs) and private equity (PE) investment funds (e.g., Belleflamme et al., 2014; Mollick, 2014; Vismara, 2016, 2018).

In this regard, crowdfunding represents an effective alternative to VCs and business angels (BAs); however, unlike the other two, it "has thus far not received attention in the international entrepreneurship literature" (Maula & Lukkarinen, 2020, p.2). For example, some studies have focused on the role VCs play as 'catalysts' of company internationalization by providing resources such as knowledge (related to international expansion strategies), as well as by affecting the strategic directions of the firms in which they invest (e.g., Fernhaber & McDougall-Covin, 2009; Makela & Maula, 2005; Park & LiPuma, 2020). Recent studies have shown that these characteristics are shared with crowdfunding, as the crowd also influences the trajectories of the companies in which they invest (Troise et al., 2021b) and provides a new stock of knowledge through crowd inputs (Di Pietro et al., 2018; Troise and Tani, 2021). It is well-known that knowledge plays a fundamental role in company internationalization (Autio et al., 2000) and that investors possess different knowledge bases (Maula et al., 2005). Crowdfunding offers a unique mechanism by enabling companies to gain non-financial benefits and new knowledge from a large number of investors. The crowd of investors, in fact, possesses a variety of experiences and backgrounds, thus ensuring a unique selection mechanism that is superior to that of any single individual, even an expert. Notably, a "crowd displays more wisdom than an individual" (Walthoff-Borm et al., 2018, p.315). Troise and Tani (2021) showed that entrepreneurs approach crowdfunding strategically to obtain additional benefits - other than funds - through crowd engagement. Companies, in fact, can thus leverage the knowledge and skills of a large number of investors/backers. Companies can exploit crowd networks - i.e., by accessing strategic networks (in terms of establishing partnerships or developing relationships with stakeholders) and increasing public awareness - and knowledge (in terms of strategies, products, and markets) (Di Pietro et al., 2018). Di Pietro et al. (2018) highlighted that such exploitation helps companies to internationalize and is crucial to speeding up the international expansion of those companies that have used equity crowdfunding (ECF).

Several scholars of international entrepreneurship have highlighted the importance of decision-makers evaluating and exploiting new opportunities to internationalize (e.g., Lu & Beamish, 2001; Oviatt & McDougall, 1994, 2005; Schweizer, 2012; Wright & Ricks, 1994). Technological advances may open up internationalization opportunities to companies and tap foreign markets (Oviatt & McDougall, 2005). The choice to use crowdfunding is part of the strategic decision-making process of entrepreneurs, as they may decide to approach new technologies and systems to obtain further resources and/or for other purposes (Troise and Tani, 2021). Interestingly, crowdfunding can be strategically adopted to internationalize.

Despite the recent exponential growth of crowdfunding and the potential enabling effect of crowdfunding platforms for SME internationalization (Cai et al., 2021; Martinez-Climent et al., 2018; Mochkabadi & Volkmann, 2018; Moritz & Block, 2016), very little is known on its possible use for purposes other than fundraising and, in particular, to facilitate entrepreneurial internationalization (Cumming & Johan, 2016; Shneor & Maehle, 2020).

Accordingly, scholars presently have limited knowledge of the role played by crowdfunding in business internationalization, and the ways in which this new player can enable them to enhance or initiate this process and/or bypass traditional systems and channels remains unclear. Hence, the lack of prior research in this field represents a major gap in the existing literature. To remedy this state of affairs, there is an ongoing call for further research to be conducted in this research stream (Cumming & Johan, 2016), which has hitherto only been addressed by some sporadic studies (e.g., Di Pietro et al., 2018).

Adding to this, and to the best of our knowledge, little attention has also been paid to SMEs, despite such companies increasingly resorting to crowdfunding, of which they are target (Troise et al., 2020a, b). Unlike multinational corporations, SMEs have traditionally been considered local firms, i.e., companies the activities of which mainly take place within national boundaries (Pleitner, 1997); however, technological advances have facilitated their global access (Dabic et al., 2020) and crowdfunding platforms represent an intriguing opportunity for them to overcome traditional barriers and access key resources - such as any missing knowledge - thus compensating for their shortcomings.

Our study was aimed at filling these gaps in the literature by exploring how SMEs can use ECF (Ahlers et al., 2015; Troise et al., 2020b, 2021b; Vrontis et al., 2021) and reward crowdfunding (RCF) (Davis et al., 2017; Mollick, 2014) to internationalize, and the connected potential limitations (Politecnico of Milan, 2020; Troise et al., 2020b). Our choice of these two types of crowdfunding systems (which is specifically explained in the next section) is related to their nature and utility compared to other models (e.g., lending and donation...

Um weiterzulesen


VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT