CROWDFUNDING IN ACTION: HOW

INSTITUTIONAL LOGICS ENCOURAGE AND

CONSTRAIN AFFORDANCE PERCEPTION

Claire Ingram, Stockholm School of EconomicsRobin Teigland, Stockholm School of Economics

Emmanuelle Vaast, McGill University

• The crowdfunding model has been treated as a new form of venture capital investment (cf., Belleflamme, et al., 2010; Carvajal, et al., 2012; Schweinbacher and Larralde, 2012; Mollick, 2014)

“We haven’t had that many projects, and the projects we’ve had haven’t really held the kind of quality that we had hoped for... And we don’t know why.” - Institutional Actor, Stockholm

“I don’t get the feeling that crowdfunding is the new thing and we can forget everything else. That’s not the feeling I have and that’s not the talk I hear.”- IT entrepreneur, Stockholm

The Puzzle

How do the prevailing institutional logics in an institutional field affect the affordances perceived by

users of an ICT-enabled service?

Literature: Affordances

• …are “action possibilities and opportunities that emerge from actors engaging with a focal technology” (Faraj and Bijan, 2012: 238) • The concept is relational; technology affordances

are enabled by human agency interacting with a particular technology (Majchrzak and Markus, 2012; Faraj and Bijan, 2012). • BUT human agency cannot be divorced from the

institutional context in which it is embedded (Thornton et al, 2012; Battilana et al, 2009).

Literature: Institutional Theory Actors embedded in

environment defined by cognitive, normative and structural considerations

Pressure towards stasis Limited human agency

(Battilana et al. 2009)

Focus here specifically on Institutional logics, which are part of a broader, accepted belief system about what constitute legitimate expectations and goals within a shared field.

(Thornton, 2002)

Methods

• Qualitative, theory-building case study methodology (Benbasat et al., 1987; Yin, 1994).

• Sample of those who self-identified as searching for funding at a Stockholm event

• 10 chosen, based activeness on social media (Twitter, LinkedIn, Facebook)

• Snowballing and purposive sampling

• A total of 29 interviews with 27 actors

1 Entrepreneur #1 Mobile questionnaire

2 Entrepreneur #2 Co-working space

3 Entrepreneur #3 Crowd sourced food data

4 Entrepreneur #4 Online education

5 Entrepreneur #5 Digital design agency

6 Entrepreneur #6 Online storyboard

7 Entrepreneur #7 Co-working space

8 Entrepreneur #8 Digital storytelling

9 Entrepreneur #9 Blog aggregation tool

10 Entrepreneur #10 Travel experience app

11 Entrepreneur #11 Clothing size simulator

12 Entrepreneur #12 Wifi-sharing app

13 Entrepreneur #13 Student competition site

14 Entrepreneur #14 Crowdfunded advertising

15 Entrepreneur #15 Film producer

16 Entrepreneur #16 Early crowdfunding site

17 Institutional Actor #1 Business coach

18 Institutional Actor #2 Not-for-profit agency

19 Platform #1 Equity-based site

20 Platform #1 (follow-up) Equity-based site

21 Platform #2 Equity- and Reward-based site

22 Platform #2 (follow-up) Equity- and Reward-based site

23 Platform #2’s designers Digital design agency

24 Platform #3 Crowdfunding site that closed down

25 Repeat Funder #1 Media industry

26 Repeat Funder #2 Media and academia

27 Venture Capital Investor Large bank

28 Angel Investor #1 Invests in personal capacity

29 Angel Investor #2 Invests as part of a group

What are the features of the platform?1. The opportunity to attract small amounts of funding

from a large number of investors, thus making a large amount of money.

2. The opportunity to attract and tap a crowd by facilitating discussions about an entrepreneur’s project both on social media and on the crowdfunding platform.

3. The possibility of connecting with like-minded people who may get involved with the business in the near future, whether by sharing their network or by sharing resources other than money, like information or skills.

Constraints on features

• Going private:“…we had a Swedish investor that no one knew about in other parts of the world… these global investors, huge investors didn’t know anything about our biggest investor in Sweden. [And did that scare them off, do you think?] Yeah it scared them off; they want someone they have been working with before, and so we had a problem.”

• Going public:“I think that people are a bit self-conscious, it feels like they’re bragging or something. Because in a way funding a project is a bit like buying a new handbag… and I wouldn’t post a picture saying ‘look at my handbag it’s so damn nice’.”

How do these relate to Institutional Logics?• Pursuit of funding• Pursuit of partnership and tangible resources• Pursuit of legitimacy and intangible resources• But a trade-off

Perceived Affordances

• Insufficient legitimacy• Some funding, but not enough (especially given

opportunity cost(s) )• Possible network benefits• Neither tangible nor intangible benefits

Theoretical contribution

• Illustration of the role that institutional logics play in affordance perception• In other words, the institutional context that

entrepreneurs face as well as the material features of the platforms jointly shape whether entrepreneurs come to consider crowdfunding as a worthwhile funding option.

Thank You!

Claire.Ingram@hhs.se

@Claire_EBI