The patent paradox in crowdfunding: an empirical analysis of Kickstarter data

Abstract

Building on signaling theory, this paper analyzes whether projects signaling patented technologies have a higher probability of funding success on a reward-based crowdfunding platform as compared to a control group of similar projects. Our analysis of a set of Kickstarter projects suggests the existence of an apparent paradox concerning the role of patents in this funding context. Despite solid evidence in entrepreneurial finance literature on the positive role of patents for accessing financing from professional investors such as VCs and business angels, our results from the reward-based crowdfunding context point out a negative signaling role of patents. We provide explanations to reconcile such evidence with previous relevant literature and highlight promising avenues for future research in this area.

Psychological Determinants of Investor Motivation in Social Media-Based Crowdfunding Projects: A Systematic Review

“…Usually, investors do not possess the skills required for assessing the projects and technologies proposed by the entrepreneur, while entrepreneurs tend to be reluctant about revealing all the information about the proposed products/technologies and their potential on the market. Consequently, it is difficult for investors to identify the information they need to assess the quality of start-ups and to distinguish between promising and unprofitable investments (Meoli et al, 2019 ). The matter of asymmetry is very important in crowdfunding campaigns that are carried out online for a short period of time.…”

“…Meoli et al ( 2019 ) have studied the role of patents in the attraction of investors in reward-based crowdfunding . Unlike professional investors, such as venture capitalists, for whom holding a patent for the product to be developed via the start-up is a favorable argument for financially supporting the project, in the case of backers the authors identified that this aspect correlates negatively.…”

“…Crowdfunding platforms provide numerous technological advantages such as cost reductions, the access of creators to the resources of investors, efficiency, flexibility and saving the time required for accessing the funds. Hu et al, 2015;Menon and Malik, 2016;Oranburg, 2016;De Luca et al, 2019;Foster, 2019;Allon and Babich, 2020 reward crowdfunding market; the crowdfunding platform is also called the Chinese Kickstarter (Wang and Xue, 2019).…”

“…With respect to the connection between the characteristics of disruptive innovations identified in the literature and the financing of start-ups, we note that the use of crowdfunding type campaigns also provides numerous technological advantages, the most significant of which are cost reductions, the access of creators to the resources of investors independently of their geographical location, efficiency, flexibility and saving the time required for accessing the funds. This means of financing projects has lower costs compared to classic loans due to the low value of taxes and fees (Menon and Malik, 2016). For investors, the advantage resides in the allocation of small amounts of money, the application of low fees, and the possibility to be directly involved in projects they deem interesting.…”

“OPER.TEN” Transform Emergency Now! - facing Covid-19 with Open Innovation and Human Centered Design

“…These open models of collaboration include many actors who gained increasing importance in collaborating with firms during the OI era, such as Startups, Spinoffs, Venture capitalists, Employees, Lead users, Individuals, Inventors, Innovators, and, among all, Universities. In particular, since the diffusion of the Technology Transfer Offices, university efforts to commercialize science have evolved (Kochenkova et al, 2016), and new pathways are emerging, such as the spin-off creation based on research results (Munari et al, 2016), crowdfunding of entrepreneurial projects (Meoli et al, 2019), and an interesting novel approach relates to the activation of OI initiative (Enkel et al, 2009). Over the years, several companies have used Hackathons (Mohajer Soltani et al, 2014) and other OI forms to generate creative ideas (Dahlander and Wallin, 2020), involving universities in their programs.…”