Industrial Marketing Management: Julia A. Fehrer, Suvi Nenonen

Industrial Marketing Management xxx (xxxx) xxx–xxx
Contents lists available at ScienceDirect
Industrial Marketing Management

journal homepage: www.elsevier.com/locate/indmarman
Research paper
Crowdfunding networks: Structure, dynamics and critical capabilities

Julia A. Fehrera,b, , Suvi Nenonena
⁎
a
The University of Auckland Business School, Auckland, New Zealand
b
University of Bayreuth, Bayreuth, Germany
ARTICLE INFO ABSTRACT
Keywords: Crowdfunding platforms – bringing together entrepreneurs, investors and customers – have grown rapidly over
Crowdfunding recent years. Crowdfunding networks are open, multisided markets that match founders and funders on
Platform businesses crowdfunding platforms. The unique structure of these networks blends social and business networks and
Dynamic capabilities comprises a complex array of closer and more distant network relationships. Research investigating the char-
Network management
acteristics of these open and highly dynamic network structures is in its infancy and capabilities critical to
Collaborative economy
operating in them are under-explored. Thus, this study follows an abductive reasoning process to understand
critical capabilities for influencing and orchestrating crowdfunding networks. It draws on a thematic content
analysis of 1484 blog entries written by crowdfunding experts and a comprehensive review of (i) literature on
crowdfunding networks and (ii) five literature streams dealing with dynamic capabilities in evolving network
structures. As a substantial contribution, this research delineates a portfolio of four collaborative capabilities –
visioning, dynamic business modelling, engaging, and attaining social continuity – essential for operating suc-
cessfully in crowdfunding networks. These new collaborative capability sets assume a new understanding of
agency as a continuum of managerial and collective agency, an understanding that is novel within the network
management and the capabilities literature.
1. Introduction in 2015 (Masssolution, 2016) and its global impact expected to grow
further (World Economic Forum, 2016). Several now well-known start-
‘I understood from the earliest stages that to make my idea a reality I ups, such as Oculus, have their origins in crowdfunding projects (Brown
needed a great deal of help and support from like-minded people. et al., 2017). Traditional organizations, banks especially, have also
From my very first interaction with crowdfunding I recognised it not recently launched their own crowdfunding platforms. However, fra-
only as a financing platform, but also a community building plat- meworks to understand how entrepreneurs and managers operate and
form.’ position successfully in crowdfunding networks lack scientific scrutiny
to date.
– Philip Martin, Founder Blanco Nino Tortilleria Crowdfunding networks have a unique network structure. They are
described as two-sided markets orchestrated by crowdfunding plat-
Crowdfunding as a phenomenon of the collaborative economy has
forms that match founders with funders (Eloranta & Turunen, 2015;
emerged as a novel source of capital for entrepreneurs (Burtch, Ghose,
Rochet & Tirole, 2003). They differ from other platforms in the sharing
& Wattal, 2013). Crowdfunding refers to efforts by entrepreneurs to fund
economy, such as dating (e.g. Tinder) and real estate (e.g. Airbnb),
their ventures by drawing on relatively small contributions from relatively
because they don't provide a one-to-one but a one-to-many matching
large numbers of individuals using the internet, without standing fi-
mechanism (Belleflamme, Omrani, & Peitz, 2015). Crowdfunding net-
nancial intermediaries (Mollick, 2014). Crowdfunding platforms such
works involve an extensive number of actors with ‘fluid’ memberships
as Indiegogo and Kickstarter have gained much attention for enabling
based on close and more distant ties and no formal inclusion or ex-
organizations and individuals to raise funds from crowds of ordinary
clusion criteria (Brown, Mawson, & Rowe, 2018; Dagnino, Levanti, &
people (Brown, Boon, & Pitt, 2017). These platforms have grown dra-
Mocciaro Li Destri, 2016; Möller & Halinen, 2017). These networks are
matically in recent years (World Economic Forum, 2016), with the
open and consist of a complex array of personal and business re-
sector's turnover rising from $US2.7 billion in 2012 to $US 34.4 billion
lationships (Brown et al., 2018).
⁎
Corresponding author at: the Graduate School of Management at the University of Auckland Business School, Auckland, New Zealand; Owen G Glenn Building, 12
Grafton Road, New Zealand
E-mail addresses: [email protected] (J.A. Fehrer), [email protected] (S. Nenonen).
https://doi.org/10.1016/j.indmarman.2019.02.012
Received 15 April 2018; Received in revised form 26 November 2018; Accepted 15 February 2019
0019-8501/ © 2019 Elsevier Inc. All rights reserved.
Please cite this article as: Julia A. Fehrer and Suvi Nenonen, Industrial Marketing Management,
https://doi.org/10.1016/j.indmarman.2019.02.012
J.A. Fehrer and S. Nenonen Industrial Marketing Management xxx (xxxx) xxx–xxx
Initial academic work exploring crowdfunding networks has focused entries. A description and discussion of the four collaborative capability
on the essential role that (social) network size plays in crowdfunding sets arising out of our abductive reasoning process are presented in
success (e.g., Burtch, Ghose, & Wattal, 2013; Lin, Prabhala, & section four. Finally, we discuss the theoretical advances and manage-
Viswanathan, 2013). However, early empirical evidence suggest that a rial implications as well as the limitations of our research.
more complex and dynamic interplay between versatile actors in the
closer and more distant networks around the founder determines 2. Theoretical framework
crowdfunding success (Lehner, 2014). This emerging stream of litera-
ture that views crowdfunding from a dynamic process perspective 2.1. Research on crowdfunding networks
(Brown et al., 2018) is examining how new ventures leverage open
network structures to shape ‘ready’ markets for new products and ser- Crowdfunding began gaining mainstream traction with the launch
vices (Brown et al., 2017). This literature is in infancy and capabilities of the crowdfunding platforms Indiegogo in 2008 and Kickstarter in
for operating successfully in these complex open network structures 2009. That development prompted an exponential increase in world-
remain largely under-explored. wide crowdfunding initiatives, with the money raised increasing from
Thus, the purpose in this paper is to explore critical capabilities for $US2.7 billion in 2012 to $US234.4 billion in 2015 (Masssolution,
successfully operating and collaborating in crowdfunding networks. We 2016). The first academic publications on the phenomenon began ap-
began our work by raising three expectations regarding capabilities in pearing in 2010/2011. Ordanini, Miceli, Pizzetti, and Parasuraman
open network structures not yet addressed in existing capability lit- (2011), Belleflamme, Lambert, and Schwienbacher (2010), and
erature. First, given that crowdfunding networks are typically ephem- Lambert & Schwienbacher (2010) laid the conceptual foundation for
eral and decentralised, we expected network capabilities to be ‘softer’ crowdfunding as a phenomenon that involves an open call – through the
(Möller & Halinen, 2017), with the aim of influencing or orchestrating internet – for a collective effort to invest in and support other individuals or
rather than managing the entire network. Second, we anticipated that organizations.
capabilities in open network structures would differ from business The academic database Scopus indicates that research on crowd-
networks in terms of the degree to which the founder can control funding gained particular momentum in 2013, with the publication of
capability deployment and related outcomes. Third, due to the central 257 academic articles predominantly in the fields of business and
role of social-network relationships, we expected that capabilities in management, social science, economics, and computer science. Based
evolving crowdfunding networks would probably include some sort of on the ABDC journal quality list (http://www.abdc.edu.au/pages/abdc-
social capacity. We applied an abductive reasoning process to analyse journal-quality-list-2013.html) we identified 76 of these articles as
capabilities in crowdfunding networks, drawing on rich empirical data high-quality ones (A or B gradings) within the fields of management,
from 1484 crowdfunding blog entries written by crowdfunding experts, marketing, and service science, and these were the ones we analysed in
and also on five literature streams pertaining to five forms of cap- detail during our study.
abilities: dynamic (Eisenhardt & Martin, 2000; Teece, 2007; Teece, Most of the academic discourse on crowdfunding can be found in
Pisano, & Shuen, 1997), entrepreneurial (Alvarez, 2001; Maguire, Hardy, the entrepreneurial literature. Marketing and service research has paid,
& Lawrence, 2004); network (Möller & Halinen, 2017; Nordin, Ravald, with a few notable exceptions (Brown et al., 2018; Hu, Li, & Shi, 2015;
Möller, & Mohr, 2018; Perks, Kowalkowski, Witell, & Gustafsson, Lacan & Desmet, 2017; Quero & Ventura, 2018), minimal attention to
2017), marketing (Day, 2011; Morgan, 2012), and commercialization the phenomenon. As Mollick (2014) emphasized, little is known about
capabilities (Aarikka-Stenroos, Sandberg, & Lehtimäki, 2014; O'Connor the field of crowdfunding from an academic, theory-building perspec-
& DeMartino, 2006; Story, O'Malley, & Hart, 2011). tive. By highlighting the characteristics of crowdfunding networks
The present research offers three specific contributions. First, in discussed in the literature (for a summary, see Table 1), this section of
response to Mollick's (2014) call for more theory building regarding the our paper lays the foundation for a dynamic perspective of network for-
dynamic process of crowdfunding, we delineate from our extensive mation aimed at casting light on the complexity of operations and colla-
review of the literature, the characteristics of crowdfunding networks. boration in crowdfunding networks.
Second, we pin down a portfolio of collaborative capabilities critical for
operating and collaborating successfully in crowdfunding networks: 2.1.1. Network structure
visioning, dynamic business modelling, engaging, and attaining social con- The crowdfunding literature defines crowdfunding networks as two-
tinuity. These capability sets contribute to value creation on two levels: sided markets (Belleflamme et al., 2015; Bouncken & Komorek,
the focal actor (i.e., the founder) and the network. Our research thus Malvine, Kraus Sascha, 2015; Lacan & Desmet, 2017), which means the
broadens the perspective of value creation from the current dominant crowdfunding platform provides a matching service between two sides
firm-centric understanding of value creation in the existing capabilities of a market – founders and funders (Eloranta & Turunen, 2015; Rochet
literatures to a network-centred understanding of value creation. And, & Tirole, 2003; Thomas, Autio, & Gann, 2014). Belleflamme et al.
third, we broaden the understanding of capabilities by shifting the focus (2015) argue that these markets in many cases did not exist before,
from one centred on executing managerial agency to one centred on meaning, markets are shaped through crowdfunding initiatives.
operating with collective agency, and from one centred on predictors of Crowdfunding platforms differ from other platforms such as dating and
success for focal actors or networks to one centred on predictors of real-estate ones in that they do not provide a one-to-one but a one-to-
value creation in the system as a whole. many matching mechanism, which is not surprising given that crowd-
In keeping with Gioia, Corley, and Hamilton (2012), we employ the funding initiatives require extensive numbers of funders to be suc-
traditional structure in this paper of a literature review followed by our cessful (Belleflamme et al., 2015).
methodology and findings. However, because we used the principles of Arguably, by definition, multisided markets refer to open network
abduction during our study, our data analysis guided our consultation structures (Fehrer et al., 2018). Crowdfunding networks involve an
of relevant literature, and vice versa, over multiple iterations. This extensive number of actors who, because they have only transient ties
paper will be presented as follows. First, we review the extended lit- to one another, form ‘fluid’ memberships that lack formal inclusion or
erature on crowdfunding networks. Next, we discuss three capability exclusion criteria (Brown et al., 2018; Dagnino et al., 2016; Möller &
sets relevant for operating and collaborating in emerging networks Halinen, 2017). In other words, crowdfunding networks are open and
derived from the five capabilities literatures. In the third section, we form around continuously emerging, non-hierarchical collaborations
introduce the abductive reasoning approach as the method to system- among peers (i.e., founders and the crowd) (Ketonen-Oksi, Jussila, &
atically combine the outcomes of our literature reviews with the rich Kärkkäinen, 2016). These informal ties require low tie-specific invest-
insights on crowdfunding success we extracted from the 1484 blog ments, and they often form spontaneously and serendipitously.
2
J.A. Fehrer and S. Nenonen
Table 1
Selected key contributions informing the understanding of crowdfunding networks.
Network perspective Article Main focus Approach Contribution to understanding crowdfunding networks
Network structure Crowdfunding networks as two-sided Bellflamme, Omrani, and Provides a description of the crowdfunding sector, Conceptual Elaborates on the cross-group and within-group external
markets Peitz (2015) emphasising its key characteristics and the economic effects of two-sided markets
forces in play
Bouncken, Komorek, and Provides overview of crowdfunding literature Conceptual Describes crowdfunding in the context of two-sided
Kraus (2015) markets
Lacan & Desment (2017) Uses the theoretical framework of two-sided markets, to Quantitative: structural Reveals that attitudes towards a crowdfunding platform
investigate how choice of crowdfunding platform affects equation model moderate funders' willingness to participate
funders' willingness to participate in a crowdfunding
project
Cross-sectional network Crowdfundingnetworks signalling Lin, Prabhala, and Investigates the effect of friendship networks and Quantitative: Shows importance of social networks and informal cues
perspective social capital Viswanathan (2013) information asymmetry in online peer-to-peer lending regression for signalling a founder's credit quality and hence for
successful funding
Burtch, Ghose, and Examines social influence (amount and timing of other Quantitative: Validates that crowdfunding is beneficial for awareness
Wattal (2013) funders) in a crowd-funded marketplace for online regression and attention-building around ventures
journalism projects
3
Cha (2017) Looks at factors that influence the success of crowdfunding Quantitative:r Identifies signalling factors (human capital, social capital
campaigns within the context of video games egression and geography) that affect the success of crowdfunding
Social networks determining Mollick (2014) Offers a description of the underlying determinants of Quantitative: Suggests that personal networks, underlying project
crowdfunding success success and failure among crowdfunded ventures regression quality and geography are associated with crowdfunding
success
Agrawal et al. (2015) Examines the role of geographical distance and how Quantitative: Suggests that social networks rather than spatial proximity
crowdfunding platforms can mitigate geographical regression determines crowdfunding success in early project phases
distance
Chan and Parhankangas Investigates the effect of innovativeness (radical versus Quantitative: Suggests, in a departure from most traditional
(2017) incremental) on crowdfunding outcomes. regression entrepreneurial finance research, that crowdfunders
behave mainly as consumers, and describes how such a
role affects the relationship between innovativeness and
crowdfunding outcomes
Josefy et al. (2017) Analyses the effects of community context on Quantitative: Empirically validates the significant role of the community
crowdfunding success regression in crowdfunding success and the viability of the
crowdfunding organization
(continued on next page)
Table 1 (continued)
Network perspective Article Main focus Approach Contribution to understanding crowdfunding networks
Dynamic perspective of Social capital and crowdfunding Lehner (2014) Provides a new understanding of entrepreneurial routes by Qualitative: case Discusses the complex interplay between the various
network formation network formation using a sociological perspective studies participants in the closer and more distant networks
around the entrepreneurs as they transform social capital
into economic capital
J.A. Fehrer and S. Nenonen
Colombo, Franzoni, and Investigates the role of internal social capital for Quantitative: Shows that the internal social capital proponents may
Rossi-Lamastra (2015) crowdfunding success econometric analysis develop inside the crowdfunding community provides
crucial assistance in igniting a self-reinforcing mechanism
Brown, Mawson & Rowe Novel integrative approach towards the analysis of Qualitative: interviews Shows that networks and social capital play a critical role
(2018) entrepreneurial networks by examining both personal and in the crowdfunding process; start-ups leverage, build and
business networks involved in the equity crowdfunding draw upon a complex array of network actors and ‘ties’ as
process. they traverse the different stages of their crowdfunding
journey
Formation of legitimacy and agency in Frydrych, Bock, Kinder, Understanding, how rewards-based crowdfunding projects Quantitative: Gives a nuanced picture of legitimacy formation during
crowdfunding networks and Koeck (2014) establish and demonstrate legitimacy in a virtual, descriptive statistics rewards-based crowdfunding
impersonal context
Ley and Weaven (2011) Investigates, from the venture capitalist's perspective, the Qualitative: interviews Highlights agency control mechanisms relevant to early-
agency dynamics relevant to adopting crowdfunding stage financing
investment models in start-up financing
Systemic innovation process in Mollick and Robb (2016) Focuses on how crowdfunding might democratize the Conceptual Presents findings that point to a potentially vast
crowdfunding networks commercialization of innovation as well as financing alternative infrastructure for developing, funding and
commercializing innovation.
Di Pietro, Prencipe, and Explores the open innovation process in start-ups within Qualitative: case Provides insight into the under-investigated open
Majchrzak (2017) the context of crowdfunding studies innovation process of start-ups and suggests that
collaborating with investor networks during the
crowdfunding process leads to success
Business model innovation in open Lehner, Grabmann, and Explores the entrepreneurial implications of crowdfunding Qualitative: case Suggests that crowdfunding needs to be addressed as a
4
crowdfunding networks Ennsgraber (2015) as alternative funding source for innovations studies bundle of processes leading to innovative entrepreneurial
business models
Gamble, Brennan, and Explores how crowdfunding is affecting music-industry Qualitative: interviews Examines the process by which crowdfunding is shaping
McAdam (2017) business models the business modelling of key stakeholders within the
music industry
Quero and Ventura Applies the understanding of value propositions from Qualitative: case Provides an integrated framework of the crowdfunding
service-dominant logic to crowdfunding studies phenomenon as a business model wherein actors co-create
value by developing one actor's value proposition
Compared to networks of formal ties (e.g., between employers and perspective to investigate the complex array of network actors and ties
employees), which have an upper limit for growth due to limited that develop during the crowdfunding journey.
available resources, networks of informal ties are highly scalable be- According to Frydrych, Bock, Kinder, & Koeck (2014), positioning a
cause the pool of resources is not limited to a specific set of knowledge person or organization as a founder in such complex network structures
(Dagnino et al., 2016). Empowered by digital technology and sophis- relies on the legitimacy of the founder, with that legitimacy built
ticated software that connects these informal ties highly effectively through interaction and collaboration between founder and crowd.
(Parker, van Alstyne, & Choudary, 2016), crowdfunding platforms Identification and control in crowdfunding networks are therefore
produce a high density of resources (Caridà, Melia, & Colurcio, 2017). based not on formal relationships (such as contracts) but on perceived
legitimization and offered democratic participation (Lehner, 2014). Ley
2.1.2. Networks from a cross-sectional perspective and Weaven (2011) point to the role of agency in crowdfunding net-
The focus in the majority of current crowdfunding literature has works and the importance of having agency-control mechanisms in
been on predicting the success of crowdfunding initiatives. These stu- place during the early stage of the crowdfunding process.
dies have typically extracted large data sets from crowdfunding plat- Mollick and Robb (2016) argue that crowdfunding, via the crowd,
forms and applied regression analyses in order to estimate the like- has the potential to democratize access to capital, a process that could
lihood of success. Success, in these studies, is commonly defined as drive future innovation in a completely new way. The authors suggest
reaching the funding goal of the crowdfunding initiative (Cha, 2017). that crowdfunding's full potential can only be leveraged if the founder
However, social networks and the crowd can significantly influence regards the crowd itself, not just the crowd's financial power, as an
crowdfunding success because they signify social capital (Granovetter, asset. By drawing together crowd, funding and open dialogue, crowd-
2005). According to Lin et al. (2013), informal cues and social networks funding can secure more than funding for a project; it can also help
give credence to the founder's credibility (social capital) and thus in- create a stable community around a new service or product. Di Pietro,
crease the likelihood of securing funding. Burtch et al. (2013) also Prencipe, and Majchrzak (2017) found that ‘exploiting’ the crowd, that
confirm that early crowd development is a beneficial means of building is, integrating them through an open-innovation process, leads to more
awareness of the crowdfunding initiative. sustainable success for the crowdfunding initiative, with that success
The social networks that develop around the crowdfunding in- predicated on the funded product or service becoming commercialized.
itiative are just as important for crowdfunding success as the crowd- The commercialization of innovation ties into the discourse on
funding project's quality and its geographic proximity to the funders business modelling in the crowdfunding literature. Lehner, Grabmann,
(Argwal, Catalini, & Goldfarb, 2015; Mollick, 2014). Josefy, Dean, and Ennsgraber (2015) contend that because crowdfunding goes be-
Albert, and Fitza (2017) further accentuate the central role of the social yond the funding process, researchers need to address it as a bundle of
community and the viability of the network for crowdfunding success. processes leading to innovative entrepreneurial business models. Of
However, social networks and communities differ considerably from relevance here is Quero and Ventura's (2018) provision of a crowd-
traditional funding organizations (e.g., venture capitalists) with respect funding framework understood as a business model in which actors co-
to motives, behaviours and decision-making. Chan and Parhankangas's create value by developing another actor's value proposition. Gamble,
(2017) finding that the crowd's decision-making processes and beha- Brennan, and McAdam (2017) also address crowdfunding as a growing
viour are more akin to consumer behaviour makes crowdfunding net- phenomenon that shapes new business models and thereby affects both
works not only unique but also complex in comparison to traditional new and established actors in the market.
entrepreneurial or business networks. In summary, the coterie of scholars currently investigating dy-
Taken together, these cross-sectional studies (see Table 1) point to namics in crowdfunding processes and dynamic formations of crowd-
the essential role of social capital that comes with an emerging crowd. funding networks address some central questions regarding the struc-
They also illustrate the social-network characteristics that determine ture and particularities of open networks. However, research directed
the success of crowdfunding initiatives. However, the cross-sectional towards identifying ways of succeeding in open network structures with
perspective of crowdfunding networks gives only limited insight into their bricolage of social and business actors is still in its infancy, which
the dynamics of the entrepreneurial activity that informs the operations is why we consider it important to identify the critical capabilities
and collaboration practices occurring in such networks (Mollick, 2014). needed to operate and collaborate successfully in those structures.
Lehner (2014) argues that the size of the initial networks around the
founder alone seems inefficient as a predictor of success and that early 2.2. Critical capabilities for network formation and network management
empirical evidence points instead to a complex interplay between ver-
satile participants in the closer and more distant networks around the To develop our theoretical framework, we reviewed literature on
founder. dynamic (Eisenhardt & Martin, 2000; Teece, 2007; Teece et al., 1997),
entrepreneurial (Alvarez, 2001; Maguire et al., 2004), network (Möller
2.1.3. Network formation from a dynamic perspective & Halinen, 2017; Nordin et al., 2018; Perks et al., 2017), marketing
The complex interplay between versatile actors in the crowdfunding (Day, 2011; Morgan, 2012), and commercialization capabilities
network is evident in the emerging stream of literature on crowd- (Aarikka-Stenroos et al., 2014; O'Connor & DeMartino, 2006; Story
funding that views the phenomenon from a dynamic process perspec- et al., 2011).
tive (Brown et al., 2018). This stream examines how new ventures All five capability literatures draw on the resource-based view of the
leverage open network structures. Lehner (2014), while agreeing with the firm (Barney, 1991; Wernerfelt, 1984), define capabilities as an orga-
likes of Burtch et al. (2013) that crowdfunding success is based on the nization's capacity to deploy resources, and expect capabilities to be
social capital of the founder, argues that the economic value that arises visible as more or less routinized actions. However, these five literature
out of social capital depends on the cultural and symbolic capital cre- streams implicitly or explicitly address different maturity levels of or-
ated during the crowdfunding process. Colombo, Franzoni, and Rossi- ganizations and markets. Dynamic and marketing capabilities, for ex-
Lamastra (2015) similarly demonstrate that internal social capital (the ample, implicitly view markets as given and organizations as already
capital that develops during the early funding stage inside the crowd- formed; whereas entrepreneurial capabilities and commercialization
funding community) reinforces value-creation processes inside and capabilities view markets, networks and organizations as at least par-
outside the initial community. Brown et al. (2018) further accentuated tially emergent entities.
the need for an integrated approach to analysing crowdfunding net- In the following we provide an overview of the central activities for
works through their examination of both personal (social) networks and network management and network orchestration extracted from the
entrepreneurial (business) networks. The authors adopted a processual five literature streams. We organize these activities into the three
5
capability sets that emerged as critical phases for network formation literature. It acknowledges the need to align and re-align activities on
and network management from our literature review, namely, ‘vi- the network level, address network maintenance, renewal and updating
sioning and sensemaking’, ‘business modelling’ and ‘network develop- (Möller & Halinen, 2017), seek advice on adjusting the network, verify
ment’. needed adjustments with network members, and improve resources and
routines linked to value creation (Perks et al., 2017). The marketing
2.2.1. Visioning and sensemaking capabilities literature also emphasizes the importance of aligning the
All five reviewed literature streams place considerable emphasis on organization to the market (Day, 2011).
the ability of a focal actor (e.g., entrepreneur or firm) to vision or sense The commercialization capabilities literature highlights the process
what is taking place in their operating environment and to make sense of that extends from developing business proposals to production or service
it. Entrepreneurial capabilities highlight the importance of opportunity delivery (Datta et al., 2015; O'Connor & DeMartino, 2006; Story et al.,
identification (Arthurs & Busenitz, 2006) and ability to select which 2011). It therefore focuses on securing funding (Story et al., 2011),
ideas to pursue in the context of the firm's priorities and resource launching the new offering, managing customer leads and references
constraints (Abdelgawad, Zahra, Svejenova, & Sapienza, 2013). Dy- (Aarikka-Stenroos & Lehtimäki, 2014; O'Connor & DeMartino, 2006;
namic capabilities literature echoes the same sentiment by pointing out Rubera et al., 2016; Story, Hart, & O'Malley, 2009) and ramping up the
the importance of sensing opportunities (Teece, 2007). Marketing business by investing in repeatable processes and business infra-
capabilities provides a slightly more nuanced picture through the structure (O'Connor & DeMartino, 2006). Sandberg and Aarikka-
concept of market-learning capabilities that relate to awareness and Stenroos (2014) argue that incubation capabilities, such as applying a
curiosity for the external environment, active experimentation to gen- new business model that might damage firms' existing business and
erate insights, and preparedness to act on partial information (Day, undermine their existing business model (Dewald & Bowen, 2010), are
2011; Morgan, 2012). Commercialization capabilities literature takes required to successfully commercialize a new product or service.
the creation of a new technology as a starting point and highlights the Interestingly, the commercialization, marketing, network and en-
importance not only of exploration capabilities (Rubera, trepreneurial capability literatures agree that developing a novel busi-
Chandrasekaran, & Ordanini, 2016; Yalcinkaya, Calatone, & Griffith, ness model is rarely a product of a linear analytical process. When faced
2007) and discovery and invention capabilities (Datta, Mukherjee, & with conditions of true uncertainty, entrepreneurial firms tend to ap-
Jessup, 2015; O'Connor & DeMartino, 2006) but also of market proach business model development through probing, adaptation, ex-
knowledge and information management (Aarikka-Stenroos et al., perimentation, beta testing and prototyping (Abdelgawad et al., 2013;
2014; Rubera et al., 2016) and identification of user benefits (Aarikka- Alvarez & Barney, 2007; Day, 2011; Moorman & Day, 2016; Morgan,
Stenroos & Lehtimäki, 2014). Drawing on work by Weick (1995), the 2012; O'Connor & DeMartino, 2006; Story et al., 2009).
network literature acknowledges various forms of sensing, under labels
such as network insight (Mouzas & Naudé, 2007), sensemaking, and 2.2.3. Network development
conceptualizing (Möller & Halinen, 2017). Business modelling relies on the activities of the focal actor and
Whereas sensemaking is more about the focal actor making sense of other actors in the network. Marketing capabilities literature ac-
what is happening, network management literature emphasizes the knowledges the importance of open marketing capabilities, defined as
importance of being able to manifest the vision (envisioning) in terms the ability to access the resources of partners (Day, 2011), but it does not
of setting an agenda for the network (Möller & Halinen, 2017; Nordin explain how this can be done. Network management and commercia-
et al., 2018; Perks et al., 2017), including framing (Bessant, Öberg, & lization literature, however, depict a process that includes identifying
Trifilova, 2014), sense-giving (Henneberg, Naudé, & Mouzas, 2010), and assessing possible partners and their resources (Järvensivu & Möller,
agenda development (Järvensivu & Möller, 2009; Möller, 2010), 2009; Partanen & Möller, 2012; Aarikka-Stenroos & Lehtimaeki, 2014).
evangelizing (Nordin et al., 2018) and introducing new business pro- This process centres on selecting the most appropriate partners (Möller
positions (Mouzas & Naudé, 2007). Commercialization literature em- & Halinen, 2017), negotiating roles to ensure appropriate task dis-
phasizes the importance of positive outcomes in agenda-setting, in- tribution and goal alignment (Aarikka-Stenroos & Sandberg, 2012;
cluding ability to articulate opportunities (O'Connor & DeMartino, 2006; Partanen & Möller, 2012; Perks & Moxey, 2011; Planko, Chappin,
Story et al., 2011) and to communicate benefits to stakeholders Cramer, & Hekkert, 2017) by, for example, providing clarity of resource
(Aarikka-Stenroos & Lehtimäki, 2014). The entrepreneurship literature trade-offs, building awareness and credibility, and educating the
similarly acknowledges the importance of developing arguments that market (Aarikka-Stenroos et al., 2014; Aarikka-Stenroos & Sandberg,
appeal to various actors (Maguire et al., 2004). The dynamic cap- 2012; Järvensivu & Möller, 2009; Möller & Halinen, 2017).
abilities literature, however, mentions crafting a vision for the network Building a network also includes creating governance. In addition to
only fleetingly when it acknowledges that influencing the surrounding negotiating the right roles for each actor in the network, effective
ecosystem likely requires capabilities that increase customer value network management establishes structures and norms held in common
creation (Wilden, Devinney, & Dowling, 2016). by all network participants. The network literature suggests that the
appropriate governance system is highly contextual, with more stable
2.2.2. Business modelling and hierarchical networks, for example, likely to require a different
According to Teece (2007), to operate successfully in the market, governance system from the systems evident in emerging and loose
actors need to be able to delineate an appropriate business model and to networks (Möller & Halinen, 2017). Network governance typically
define enterprise boundaries (i.e., which activities are conducted by the covers governance mode and leadership structure, rules for collabora-
focal firm, which by its partners). The dynamic capabilities literature tion, knowledge sharing and value appropriation, and decision-making
calls this ability, seizing. The same sentiment is echoed in the marketing mechanisms (Dagnino et al., 2016; Partanen & Möller, 2012; Planko
capabilities literature that highlights the importance of architectural et al., 2017). The dynamic capabilities literature talks extensively about
marketing capabilities and resource reconfiguration capabilities (Morgan, governance, such as aligning incentives, minimizing agency and
2012). Although network literature pays less attention to seizing, it blocking rent dissipation, but it investigates these activities within the
acknowledges the need to determine focal actors' goals and core ac- context of the firm and its employees rather than the context of the
tivities (e.g., Partanen & Möller, 2012). These goals, however, are likely wider network (Teece, 2007). The commercialization literature, how-
to change due to the dynamic developments of networks. Consequently, ever, emphasizes that the processes of accessing, mobilizing and orga-
continuous and dynamic alignment and re-alignment processes need to be nizing relational resources in a network require softer governance
in place. mechanisms such as trust and reciprocity between actors (Aarikka-
Network literature shares this view with dynamic capabilities Stenroos & Sandberg, 2012).
6
Table 2 networks. Most of the literature focused on network, dynamic, en-

Blog website selection. trepreneurial, marketing and commercialization capabilities suggests
Blog website Blogs 2013 Blogs 2016 that network-related capabilities are normal organizational capabilities
in that sense that they aim to manage the network and are deployable
http://www.crowdfundbuzz.com/crowdfunding_ 10 29 by the focal firm and its managers. The outcomes of those capabilities,
blog/
moreover, are largely under managers' control. However, the nascent
http://www.nesta.org.uk/project/crowdfunding 10 19
https://www.youcaring.com/blog 23 141
empirical evidence regarding crowdfunding networks suggested to us a
https://www.kickstarter.com/blog 25 89 largely different empirical context and the presence of a different kind
https://crowdfunduk.org 26 4 of capability that is crucial for operating and collaborating in crowd-
https://www.seedinvest.com 35 14 funding networks. By tacking back and forth between the extant lit-
http://blog.crowdcube.com 36 151
erature and the empirical data extracted from the crowdfunding blogs,
http://crowdsourcingweek.com 143 147
http://www.crowdfunder.co.uk 180 133 we endeavoured to refine our understanding of capabilities for network
http://www.huffingtonpost.com 199 197 formation and management in the context of crowdfunding networks.
https://go.indiegogo.com/blog 201 166
Total 888 1090
3.1. Data selection
Blogs on crowdfunding are numerous and provide a rich source of

2.2.4. Expectations for network formation and network management in
data. We found over 3500 blogs, posted on a variety of blog websites,
crowdfunding networks
written by crowdfunding experts. Our overall target was to identify
Our literature review on crowdfunding networks and the insights
blogs featuring content on crowdfunding success and success factors in
we gained from the five capability literature streams raised three ex-
order to extract indicators for critical capabilities for operating effectively
pectations not covered in the existing capabilities literature. First, be-
in crowdfunding networks.
cause context influences the exact manifestations of network cap-
In line with accepted selection procedures in netnography (Kozinets,
abilities (Möller & Halinen, 2017), we can assume that ephemeral and
2002; Kozinets, 1999), we followed a sophisticated process to de-
emerging networks capabilities will be more influencing or orches-
termine the text material for this research. Netnography is a qualitative
trating in nature, in contrast to more traditional and stable networks,
research method to unobtrusively study the nature of online discourse.
where management of the network tends to be direct. Also, because
In our study, it was applied to understand which themes are of sig-
crowdfunding networks are typically ephemeral and decentralised, we
nificant interest in the discourse of crowdfunding blogs. Thereby, the
can expect network capabilities to be ‘softer’, aiming to influence or or-
discourse, rather than the bloggers themselves are subject to this re-
chestrate.
search. Since netnography is conducted without direct researcher par-
Second, because capabilities in crowdfunding networks are likely to
ticipation, it can be used to unobtrusively analyse the discourse, free
differ with regards to agency, we can expect the agency of the actors
from the bias which may arise through the researcher's involvement
will determine their potential contribution in the network and their role
(Jawecki & Fuller, 2008).
in network management and network orchestration. According to
Netnography gives a detailed description as to how to identify if
Möller and Halinen (2017), existing network literature awards man-
information publicly available on the internet is trustworthy. Based on
agerial agency to one organization and examines how this focal orga-
this description, we whittled our selection down to 11 blog websites
nization carries out network management activities. However, in open
(see Table 2). Our initial screening of the blog material had allowed us
crowdfunding networks, we might see variation in terms of the degree
to develop a keyword list, which we applied to the 11 websites. These
to which the focal organization is able to control capability deployment
keywords (including for example: success, tips, news, best practice,
and related outcomes. It appears that ‘visioning and sensemaking’ allow
lessons learned, advice, outlook) helped us identify blogs relevant for
for more traditional, managerial agency because the focal actor de-
crowdfunding success. Further, we selected for blogs: published in English,
velops network insights and the agenda for the network relatively in-
published in 2013 or 2016, original content (with duplicates excluded),
dependently. That said, ‘business modelling’ and ‘network develop-
quality writing (accuracy, adequate language). We decided to focus on
ment’ are likely to involve more collective agency, wherein the open,
2013 and 2016 because 2013 was the first peak of crowdfunding de-
emerging network of actors shares governance and undergoes con-
bates in the blogosphere, while 2016 left a sufficiently large gap of time
tinuous alignment and re-alignment without any one actor being able to
to limit duplicates in the data set.
effect the outcomes alone or to remain independent from the engage-
In a second step, our extensive manual screening with respect to
ment of other actors.
content quality centred on the professionalism of the writing, the
Our third expectation concerns the significant and active role the
number of blog entries of a focal author and, if accessible, the author's
social network plays in crowdfunding success and shaping a ready
profile (Kozinets, 2002). The data set that we extracted as a result
market. As such, we can expect the critical capabilities in crowdfunding
contained 1484 comments from 527 crowdfunding blogs, a number that
networks to relate to the social capacity of an organization.
represented 14.5% of the 3500 blogs we initially identified.
3. Methodology 3.2. Research process and data analysis
The abductive reasoning approach (Tavory & Timmermans, 2014) Our thematic content analysis (Mayring, 2015) analysis consisted of
that informed our research process is a nonlinear, non-sequential, four stages. During the first, we identified themes within the data set
iterative process of systematic and constant movement between litera- that would provide us with both an overview of the discourse in the
ture and empirical data, through which literature-based results can be crowdfunding blogosphere and an initial sense of the phases of the
reconceptualised or expanded as indicated by the empirical findings crowdfunding process. An inductive open coding process executed in
(Dubois & Gadde, 2002; Nenonen et al., 2017). Abduction is a suitable MAXQDA 12 qualitative software led us to identify 18 themes ranging
means by which to lay a foundation for further inquiry because it begins from the motivations of the founder to use crowdfunding and the choice
with ‘unmet’ expectations and then infers plausible explanations of the crowdfunding platform through to pitch design and social media
(Nenonen et al., 2017; van Maanen, Sørensen, & Mitchell, 2007). interactions. We also identified four phases within the crowdfunding
Our decision to use abductive reasoning rested on the mismatch process: preparation and pre-funding, early bird funding, regular
between the existing literature and our experience with crowdfunding funding and creating ready market.
7
The second stage of the research process involved a systematic lit- Activity 2, roadmapping a preliminary plan, is almost identical to
erature review and references back to the first stage of our work. The ‘roadmapping’ identified by Nordin et al. (2018). Although this activity
inductive open coding of the first phase identified various activities that also relates to ‘sensing and sensemaking’ (Möller & Halinen, 2017), it
founders conduct during the four phases of the crowdfunding process. gives a more nuanced view of planning, goals and metrics and thus has
Mindful that capabilities are best detected as actions (Morgan, 2012; similarities to the strategic marketing planning capabilities that Morgan
Winter, 2000), we used these identified activities to guide our literature (2012) identified. Roadmapping places a strong emphasis on early
review of network, dynamic, entrepreneurial, marketing, and com- funding success, and thus relates to the important role of signalling
mercialization capabilities and thereby allow us to determine their re- during the early funding phase.
levance for operating in crowdfunding networks. This step persuaded us The third underlying activity, evangelizing in the inner circle, seems to
to reassemble the capabilities into three capability sets, as reported in us to link into the ‘sensing and sensemaking’ (Möller & Halinen, 2017)
the second section of this paper, namely, visioning and sensemaking, and ‘agenda-setting’ (Henneberg et al., 2010; Järvensivu & Möller,
business modelling, and network development. 2009) capabilities in the existing literature. It also relates to the ability
The third stage entailed a deductive analysis of the empirical data to articulate opportunities in the commercialization literature
based on the results from our Stage 2 literature review (Mayring, 2015) (O'Connor & DeMartino, 2006; Story et al., 2011). This third activity
and a reflection on the empirical material (Alvesson & Sköldberg, 2005) enables founders to refine their vision narrative and prepare their close
in light of the three capability sets. Our goal here was to explore if and network for ‘getting active’ as soon as the crowdfunding initiative is
how the three capability sets manifest in the crowdfunding context. In launched on the crowdfunding platform. Entrepreneurship research
practice, we again coded the blog data, using codes derived from the also validates the importance of close network ties during the early
literature review, such as ‘identifying potential partners’, ‘crafting a stages of entrepreneurial ventures (e.g., Barney, Herrik, Chen, Burns, &
vision’, ‘evangelizing within the inner network’ and ‘assessing potential Angus, 2017).
partners’. The fourth activity, assessing alternative platforms and partners, is well
Our aim during the fourth stage was to detect possible sub-sets of described in the network management literature under labels such as
the previously identified three capability sets. To do this, we revisited ‘identifying and assessing possible partners and their resources’
the blog data one more time and scrutinized it using open, axial and (Järvensivu & Möller, 2009; Partanen & Möller, 2012) and ‘selecting
selective coding (Strauss & Corbin, 1997, 1998). As a result, we indeed the most appropriate partners’ (Möller & Halinen, 2017). Coopetition
identified new capabilities relating to fostering active engagement (collaboration between competing firms), a phenomenon that has re-
among platform members and building intangible assets for the com- cently captured considerable attention due to its increasing relevance to
munity. These capabilities are, to the best of our knowledge, not present business practice (Ritala, Golnam, & Wegmann, 2014), seems to play an
in the existing capability literature. We completed this stage by com- important role for partnering in crowdfunding ecosystems.
paring and discussing each of our identified capability sets (along with In summary, the identified visioning capability is well established in
their underlying activities and the ability of the founder to control the existing capabilities literature. However, our study illuminates two
capability deployment and the resulting outcomes) against the under- aspects of visioning that are relatively novel within the network man-
standings we'd drawn from the existing crowdfunding literature. That agement literature and that relate closely to social networks: the im-
process led to us reforming our previous sets into four new capability portance of a founder's personality and personal story to the vision, and
sets that we think have critical relevance for successfully operating and the significant role of close networks of friends and family in the early
collaborating in crowdfunding ecosystems. These four capability sets, stages of visioning and agenda-setting.
which will be presented in detail in the next section, are visioning,
dynamic business modelling, engaging, and attaining social continuity. 4.2. Dynamic business modelling: Building adaptive and absorptive
capacities
4. Findings: Collaborative capabilities in Crowdfunding networks
The second set of collaborative capabilities (Table 4) relates to
In this section of our paper, we frame our four proposed capability ‘dynamic business modelling’, understood as building adaptive and
sets as collaborative capabilities because the central element that con- absorptive capabilities to further design and innovate the business model
nects all four refers to collaborating with the crowd. To bring more together with the crowd. We detected four underlying activities during
transparency to our findings, we present a data structure for each our research: (i) agility-building, (ii) prototyping and experimenting,
identified capability set by highlighting, in table form, the underlying (iii) advice-seeking, and (iv) legitimizing.
activities along with illustrative quotes from our data set. The first three of these activities relate to founders' efforts to de-
velop the right product, service or business model for the crowd. Nordin
4.1. Visioning: Laying the foundations for an emerging network et al. (2018) capture these activities in their discussion of ‘following an
emerging path’, ‘balancing adaptability with agility’ and ‘leveraging
This first capability set (Table 3) contains four underlying activities information flows’ within the context of network management in
that set the stage for the emerging crowdfunding network: (i) crafting a emergent high-tech businesses. The idea of seizing an emerging op-
vision narrative, (ii) road-mapping a preliminary plan, (iii) evange- portunity through fast and agile business model development is well
lizing in the inner circle, and (iv) assessing alternative platforms and established in the dynamic capabilities, marketing capabilities, and
partners. commercialization capabilities literatures (Day, 2011; Moorman & Day,
The first activity, crafting a vision narrative, is similar to the ‘vi- 2016; Morgan, 2012; O'Connor & DeMartino, 2006; Story et al., 2009;
sioning’ that Nordin et al. (2018) identified. It also resembles the Teece, 2007). Amit and Zott (2016) argue that today's rapidly changing
‘sensing and sensemaking’ (Möller & Halinen, 2017) and ‘agenda-set- economic landscape requires firms to take a holistic approach to re-
ting’ (Henneberg et al., 2010; Järvensivu & Möller, 2009) capabilities in newing and innovating their business models. They also contend that
the existing literature because the resulting vision is deliberately dynamic capabilities are central to the business model design process.
crafted to resonate with other actors in the network. One powerful way Sandberg and Aarikka-Stenroos's (2014) reference to the ‘incubation
of gaining this resonance in a crowdfunding context is to emphasize not capabilities’ required to innovate a firm's business model is also re-
just the tangible business opportunity but also the personality and the levant here.
personal story of the founder. The importance of relaying personal in- These considerations reveal that our study found little new in re-
formation has been highlighted in recent entrepreneurship research lation to the first three activities, except for the likelihood that within a
(e.g., Burns, Barney, Angus, and Herrick, 2016). crowdfunding context, the dynamic business modelling capability
8
Table 3
Visioning capability: underlying activities, outcomes and illustrative quotes.
Underlying activities Illustrative quotes
Crafting a vision narrative “Think about what inspired your project, the motivations behind it and how it is going to change the ‘status
quo’ or fill a need in the market. What was the source of your creativity and what made you decide to turn to
Developing a compelling vision and story of your emerging crowdfunding to make it come to life?” (ID 989)
business and yourself
‘Don't forget that your team's story is equally, if not more, important than the campaign itself. Sharing what
makes your project stand out will help a reporter build a story around it that will compel readers to get
involved, which is exactly what you want.’ (ID 28)
Roadmapping a preliminary plan ‘Know your goal. Set benchmarks along the timeline of your project and aim to meet those goals. Divide your
target by the number of weeks your project will run. If it's a commercial venture, you should aim to raise 25%
Defining tentative goals, milestones, methods of tracking and of your funding within 24 h. If it's a private or community venture, you should aim to raise 50% of your
timing to bring the vision to life funding within the first week.’ (ID 257)
‘Overall, we find that building momentum early can help set up a campaign for long-term success. Campaigns
that raise 30% to 50% or more of their goal in the first 48 h raise 47% more money on average.’ (ID 122)
Evangelizing in the inner circle ‘Start day one of the campaign by reaching out to your friends, your family, and possibly your social media
following.’ (ID 916)
Using close contacts as sounding board for the vision narrative
‘For me, the most important thing was to start strong. So, the morning my campaign launched, I chased down
and followed up extensively with family members and close friends to get their donations in. As a result, it
became much easier for strangers to donate to the project, especially when they see that one has hit 100% in
days.’ (ID 1050)
Assessing alternative platforms and partners ‘Researching the top bloggers and social networkers that relate to your cause is vital to your campaign. These
people and networkers can help spread the word about your campaign as they are the most likely to share it
Identifying a platform and collaborators that are aligned with through an interview, article, or a social post.’ (ID 316)
your vision and values
‘We used Indiegogo because it felt like it was the best fit for us. From square one the IGG crew was uber
supportive of our idea. And we wound up partnering with Startup America Partnership to gain some
additional support and exposure. So it just made sense.’ (ID 221)
‘Open campaigns up to other groups [i.e., crowdfunding initiatives] who may have an overlapping mission.
This type of two-way collaboration will strengthen the relationships among groups [i.e., crowdfunding
initiatives], perhaps leading to greater cross membership and joint event opportunities.’ (ID 1373)
Value creation: ‘Is your organization at a place where it is ready to grow? Do you have a story that people can relate to? Is
Articulating initial value proposition everyone on your team on board and ready to pull their weight?’ (ID 490)
‘Have your shit ready, and your crowd ready, and your fans ready, and Kickstarter is the tool to ask them to
help you” (ID 164)
requires tremendous speed because testing takes place in real time and and shapes a ready market. Engaging reflects a set of three underlying
in public, open environments as opposed to controlled laboratory en- activities: (i) attracting informal ties, (ii) activating bridging ties, and
vironments such as focus groups. The activity of legitimizing, however, is (iii) empowering and entrusting (see also Table 5). The engaging cap-
relatively new to the capabilities literatures. Although related to nur- ability thus becomes a central means of expanding the network from an
turing trust among network partners (Partanen & Möller, 2012; Planko initial inner circle of actors (family and friends) to a broad network of
et al., 2017), legitimacy is a broader concept than trust. loosely coupled informal ties.
One of the few studies explicitly addressing legitimizing in a net- The first underlying activity, attracting informal ties, is important
work management context is the investigation of platform development with respect to quick attainment of a critical mass. We could find no
conducted by Perks et al. (2017). Drawing on work by Dagnino et al. mention in the network management literature of the utility of at-
(2016) in particular, they described how an emerging platform can be tracting large numbers of potential investors or network partners.
legitimized through metrics that portray value creation and demon- According to Moorman and Day (2016), only a handful studies have
strate the platform's value to actors beyond the immediate network. examined how firms deploy marketing capabilities in order to increase
However, within the context of our study, legitimizing is more about their attractiveness as a potential investment or as a potential partner.
legitimizing the founders and their projects than it is about legitimizing Our study shows, however, in keeping with literature on social media
the platform (Frydrych, Bock, Kinder, & Koeck, 2014). Maguire et al. and digital marketing (e.g., Kannan & Li, 2017), that gaining public
(2004) describe building legitimacy and accessing resources among awareness (e.g., through social media presence and digital marketing
diverse groups of actors as central entrepreneurial capabilities, an ac- activities) is vital if the crowdfunding initiative is to reach a critical
count that aligns with what we found during our research. By con- mass of informal ties.
stantly engaging with the crowd, founders become accepted and can The second underlying activity, activating bridging ties, relates to
establish themselves as authorities in the network, an approach that, in reaching new informal ties by activating existing supporters (Dagnino
turn, lays the foundation for the support or engagement of the crowd. et al., 2016). Making sharing as easy as possible by providing relevant
content and using standardized infrastructure (e.g., hyperlinks or
4.3. Engaging: Actively relinquishing control to establish collective agency hashtags) is an essential means of activating bridging ties. Because
activation of new informal ties brings fresh ideas to the project (Perks
This third set of capabilities positions ‘engaging’ as a central new et al., 2017), this activity is important for maintaining a high degree of
capability set. By engaging informal ties, the crowdfunding initiative innovativeness in the crowdfunding ecosystem. Further, in alliance
can reach its tipping point, the moment when it pulls away from its ex- with the previously discussed activity ‘attracting’, activating bridging
isting system (Dubé, Hitsch, & Chintagunta, 2010; Katz & Shapiro, ties leverages positive network effects and enables growth within the
1985), that is, the network extends beyond the crowdfunding platform crowdfunding ecosystem and beyond (Katz & Shapiro, 1994). Attracting
9
Table 4
Dynamic business modelling capability: underlying activities, outcomes and illustrative quotes.
Agility-building ‘Prepare in advance. Make something people want to support and run a clean, well-planned campaign and then accept it
won't go smoothly.’ (ID 1409)
Building adaptive capability to adjust to changes
‘Adjust your strategy to create more content around your beneficiary's news’ (ID 712)
‘It's a good idea to see where your traffic is coming from – that way you can adjust your marketing strategies.’ (ID 1201)
Prototyping and experimenting “Let donors download beta versions, draft cartoons such as … ‘We've just hit the halfway mark! To celebrate, here is a
(very short video) of playtesting the prototype in the library.’” (ID 455)
Building adaptive capability to innovate with the
crowd ‘Invite people to sense-check for where it doesn't click. Plug the holes before launch.’ (ID 738)
Advice-seeking ‘We researched organizations that had similar causes to ours (based in Ghana, focusing on education, etc) and asked for
advice and support. We also asked mentors who have held successful crowdfunding campaigns.’ (ID 505)
Building absorptive capacity to access expert
knowledge ‘As entrepreneurs, we don't want to just grow our businesses – we want to grow them exponentially. That's why I love
seeking out advice from the top serial entrepreneurs: business owners who have built one successful company after
another after another. Their experiences can prove invaluable to those of us seeking to take our companies to the next
level, and their hard-won lessons can help create a clear track for all of us to run on.’ (ID 15)
Legitimizing ‘A contributed article or opinion piece written by you is also a good way to position yourself as voices of authority.’ (ID
527)
Signalling trustworthiness and building reputation
‘Through constant engagement with your backers, you will build a public persona as a trusted entrepreneur, and
eventually establish your business with the help of your supporters.’ (ID 366)
‘So how you connect in the real world is very important. If you or your organization is extrovert, well connected,
respected or liked in the real world – then that will be reflected in your virtual world. Your messages will be shared
because people believe in what you are doing or trust you to help you.’ (ID 40)
Value creation: ‘Not only does a contributor receive your product, but they can become part of the creation process. You can use the
Building a viable business model feedback you receive from the crowd to iterate along the way, and this dynamic relationship connects your contributors
to your product in a meaningful way.’ (ID 1224)
‘Together we're building a new model for creating. One that all of us can participate in, and one that's getting stronger
every day.’ (ID 868)
Table 5
Engaging capability: underlying activities, outcome and illustrative quotes.
Attracting informal ties ‘Crowdfunding campaigns always fail when they don't gain sufficient public awareness. And raising public awareness for
your project is only possible through proper, professional promotion.’ (153)
Building up critical mass
‘Hosting offline fundraising events is another great way to rally support and donations for your cause. During events,
contributions can easily be made to your online campaign via donation stations that can be set up with a laptop showing
your fundraising page.’ (ID 393)
Activating bridging ties ‘By the time contributions from your inner circle start to come in, it will be time to reach out to news outlets, bloggers, and
beyond to acquire some coverage and bring fresh eyes to your campaign.’ (ID 917)
Enabling the crowd to share your story with their
network ‘Ask your friends and other network contacts to share your updates and fundraiser link on their channels, too, so you will
reach their followers and find even more potential donors.’ (ID 1110)
‘Make it easy for supporters to share your story too: provide links, pictures, and a summary of your efforts for them to copy
or link. The easier it is to share, the more people will do it.’ (ID 297)
Empowering and entrusting ‘Involve your prospective backers in your decision-making process. For example, you can ask for their suggestion regarding
your perks. If your project is about a product or service, you can request them to ask for some additional features that they
Giving the crowd ownership and responsibility may want. Be sure to provide frequent project updates to your crowdfunding campaign backers and ask them to share your
project with their social media connections. This will directly involve them in your project and make them feel (quite
rightly) they are a part of your crowdfunding campaign promotion team. Do whatever you can to make sure that all your
prospective backers get attached to your project both financially and emotionally.’ (ID 897)
“Muna says, ‘to get people to do this, encourage them to take ownership of the campaign.’ He continues, ‘the simplest way
to do this, is to get them to give you feedback on every piece of your campaign such as your exact wording, the name of the
rewards, or on your video content.’” (ID 1046)
Value creation: ‘Here are numerous stories of campaigners (like Satarii Star and Gravity Light) who were approached by venture capitalists
Reaching the tipping point for market entry after the success of their campaign. They were able to demonstrate that there was a true market for their product, and that
people were willing to make a monetary transaction before the good was made.’ (ID 1227)
“The attention Ockel Sirius generated through crowdfunding put them on Microsoft's radar … they said ‘Like, okay, who
are those guys?’ And then, they looked at our campaign page, and then we started talking, and now they are officially
supporting us for the Ockel Sirius.” (ID 579)
10
and activating informal ties is thus central for confirming that a market that although some of the knowledge stays with the crowd, other
for the crowdfunding initiative exists. founders (even potential ones beyond the crowdfunding network) can
Our third activity, empowering and entrusting, references the process access it. Social capital is accordingly generated not only through the
whereby the founder gives ownership and responsibility to the crowd. crowdfunding initiative or within the crowdfunding network but also
We consider this process one of the most interesting findings of our on a socioeconomic level. Established management literature shows
study. By educating, integrating and constantly interacting with the that social capital in networks results from knowledge-based cap-
crowd, founders empower the people making up the informal ties to abilities and knowledge acquisition among actors in the network (e.g.,
take on extra roles and engage in various behaviours, such as making Houghton, Smith, & Hood, 2009; Rowley, Behrens, & Krackhardt,
decisions, representing the project and giving feedback. In short, the 2000). This stream of literature assumes that the created knowledge
crowd builds up managerial agency. stays with a focal actor and thereby creates a strategic benefit for this
As Dagnino et al. (2016) emphasize, combining informal and formal actor to compete within the system (Rodrigo-Alarcón et al., 2018). Our
ties creates value in the network and it can also lead to the informal ties research however indicates that the creation of open knowledge in
transforming, during the later phases of the network formation, into the crowdfunding networks is not exclusively for the economic benefit of
formal ties that can leverage co-generation of new specific knowledge. one focal actor but for the betterment of the network and the socio-
The commercialization literature also points to the fostering of ‘soft’ economic system as a whole. This interesting insight takes our current
governance mechanisms such as trust and reciprocity between network understanding of capabilities as sets of activities that predict success for
actors (Aarikka-Stenroos & Sandberg, 2012). However, as we dis- one focal actor and broadens it to include sets of activities that create
covered while conducting our research, informal ties can gain agency in value in the network and the socioeconomic system as a whole.
platform-based fields without being formalized. In other words, actors
who have no formal commitment to the founder or the project (e.g., 5. Discussion and conclusions
employment contract, collaboration agreement) can still become active
decision-makers and representatives of the project. 5.1. Theoretical contribution
Empowering and entrusting thus goes beyond what is known in the
network management literature as mobilizing, influencing or orches- Despite an increasing academic interest in the business models un-
trating actors (Perks et al., 2017; van Bockhaven & Matthyssens, 2017). derpinning the collaborative economy in general (Amit & Zott, 2016;
This is because the founder relinquishes control and managerial agency Benoit, Baker, Bolton, Gruber, & Kandampully, 2017) and the dynamics
in order to let the crowd build up ownership and collective agency for of the development of crowdfunding networks in particular (Mollick,
the crowdfunding initiative. This finding broadens the established 2014; Yang, Wang, & Wang, 2016), empirical research in this area is
concept of capabilities from one focused on executing managerial still in its infancy. Responding to the call for more theory building re-
agency to one focused on operating with collective agency. Managerial garding the dynamic process of crowdfunding (Mollick, 2014), we first
agency in platform-based fields thus involves not only a central actor or delineated the characteristics of crowdfunding networks based on an
consortium of actors but also a collective of numerous actors connected extensive literature review. Crowdfunding networks consist of a com-
by a digital platform. plex mixture of business and social actors (Brown et al., 2018), driven
by a variety of business, social and personal motives (Chan &
4.4. Attaining social continuity: Building intangible assets for continuity Parhankangas, 2017). To understand the degree to which this blend of
social and business network structures can be managed and orche-
‘Attaining social continuity’ brings another new capability set to the strated, we reviewed and thematically analysed five streams of cap-
table because it, too, is not evident in the existing capabilities literature. abilities literatures focused on emerging network structures: dynamic,
Attaining social continuity is a capability that leads to positive out- entrepreneurial, network, marketing, and commercialization cap-
comes for founders, funders and for the crowdfunding platform. It re- abilities.
lates to the idea of building up intangible assets such as social capital or The contributions arising out of this work are threefold. First,
open-access knowledge (Butticè, Colombo, & Wright, 2017). However, crowdfunding as a phenomenon got – with few notable exceptions
these intangible assets are not necessarily possessed by one founder or (Brown et al., 2018; Hu et al., 2015; Lacan & Desmet, 2017; Quero &
one crowdfunding initiative (Rodrigo-Alarcón, García-Villaverde, Ruiz- Ventura, 2018) – very limited attention in the marketing and service
Ortega, & Parra-Requena, 2018) but instead tend to be a common good research literature. Our literature review structures extant crowd-
of the broader crowdfunding network. We identified three activities funding research by identifying two streams that have emerged in this
underlying this new capability set (see also Table 6): (i) acknowledging developing research domain and shows how findings form a cross-
and rewarding, (ii) giving back, and (ii) generating open knowledge. sectional perspective of crowdfunding networks and a dynamic per-
Acknowledging and rewarding, the first activity, relates to showing spective of crowdfunding network formation contribute to under-
appreciation for the effort the crowd has invested in a project. It points standing the complexity of crowdfunding network structures. Our re-
towards the importance of giving a reward that adequately acknowl- search also demonstrates that crowdfunding networks differ from the
edges every resource investment of every actor. This activity also cre- network structures studied within the context of business networks and
ates a form of governance mechanism in the crowdfunding ecosystem strategic nets (e.g., Möller, Rajala, & Svahn, 2005). Because crowd-
(Dagnino et al., 2016; Partanen & Möller, 2012; Planko et al., 2017) and funding networks are ephemeral and decentralised no one focal firm or
can be seen as a key means of driving collaboration within the crowd, entrepreneur can fully manage them. As such, the role and development
an outcome that further fosters a sense of belonging to the community of social network relationships are central for crowdfunding success.
(Colombo et al., 2015; Frydrych et al., 2014). The second significant contribution of this research relates to the
The second underlying activity, giving back, emphasizes the im- delineation of a portfolio of collaborative capabilities, as depicted in
portant task of creating reciprocity in the system. Collaborative cap- Fig. 1. Our findings suggest that four interrelated collaborative cap-
abilities extend network-building capabilities, such as harvesting and abilities are critical to operating successfully in crowdfunding net-
upgrading (Nordin et al., 2018), by adding a social dimension. Re- works: visioning, dynamic business modelling, engaging, and attaining
ciprocity in a network means founders give back the favour received social continuity. While visioning and dynamic business modelling have
from the crowd. It also taps into the notion of successful founders acting been broadly discussed in the existing network, (e.g. Nordin et al.,
as role models for new founders and supporting new crowdfunding 2018), marketing (e.g. Day, 2011; Moorman & Day, 2016), commer-
initiatives. cialization (Aarikka-Stenroos et al., 2014; O'Connor & DeMartino,
The third underlying activity, generating open knowledge, ensures 2006; Story et al., 2011) and entrepreneurial capabilities literatures
11
Table 6
Attaining social continuity capability: underlying activities, outcomes and illustrative quotes.
Acknowledging and rewarding “Say ‘Thank You’: Once your community has backed your campaign, don't stop there. Be sure to thank them for sticking
with you through the process! Showing appreciation is a great step towards turning backers into advocates for your
Showing appreciation for the crowd's work campaign.” (ID 129)
‘In return for getting involved in your business or project, it is important to offer people a reward of some kind. This
doesn't have to be something expensive, in fact you can probably come up with something free. Try to have a reward for
every size donation, so that each person feels adequately appreciated for what they give.’ (ID 325)
‘And at the end we threw another closing party to make sure nobody missed out of the fun.’ (ID 665)
Giving back ‘One unique way to say thank you to donors is to reciprocate. When your donor community has a cause they are
fundraising for, then offer your help. Even if you can't donate to their cause, you can still offer to volunteer, to help with
Acting in a reciprocal manner towards the crowd their campaign, and to share their fundraiser with your social network.’ (ID 606)
‘The work however doesn't stop when the campaign ends. It's important to return the favour, which you can take as an
opportunity to connect and network with those who have sponsored you, and make sure to back them up if and when
they need it too.’ (ID 1024)
Generating open knowledge ‘We have some people on the Indiegogo campaign page who actually have more knowledge of technology than we do –
and that's really cool.’ (ID 575)
Building open knowledge for the crowd and beyond
‘Indiegogo was a great way to connect with the innovators, and we can really learn from them. The feedback you get –
the technical knowledge that [the backers] have, the ideas they have about how to improve the device … I think it
would be impossible to have this community on a platform that isn't Indiegogo.’ (ID 576)
Value creation: ‘Everybody wrote about us. Everybody wanted a piece of the cake. All before we had faced reality.’ (ID 1143)
Building open-access social capital on a
network level ‘The real reward is seeing how someone uses our equipment to create something really cool and shares it with the
world.’ (ID 1274)
(e.g. Maguire et al., 2004), our study reveals new nuances with respect social continuity are newer to the capabilities literatures. Attaining
to the important role of the personal story of the founder and the tre- social continuity brings a novel social dimension to the discussion of
mendous speed of dynamic business modelling, which takes place in network capabilities because it builds up intangible assets such as social
real time and in public and follows the rules of ‘failing fast’. capital and open-access knowledge (Butticè et al., 2017). These in-
Of the four identified sets of capabilities, engaging and attaining tangible assets are not necessarily possessed by one actor, one
CROWDFUNDING NETWORK
Acknowledging
and rewarding
ATTAINING
SOCIAL
Social Capital
Open-Access
CONTINUITY
Social Capital
Open-Access
Giving back Generating open

knowledge
Crafting Roadmapping Agility- Prototyping Attracting

vision preliminary building and experi- informal ties
narrative plan menting
DYNAMIC Viable Ready

Value ENGAGING
VISIONING BUSINESS Business Market
Proposition
MODELLING Model
Assessing
Evangelizing Advice- Legitimizing Activating Empowering
alternative
in the inner seeking bridging ties and entrusting
platforms and
circle partners
Managerial agency
Collective agency
Fig. 1. Collaborative capabilities in crowdfunding networks.
12
crowdfunding initiative or one social unit (Rodrigo-Alarcón et al., 5.2. Managerial implications
2018) but are often freely available to everyone and are created for a
common good. Open knowledge, open codes and open access to re- Our study furthermore provides new insights for managers and
sources are central characteristics of the collaborative economy entrepreneurs operating in the contemporary context of the collabora-
(Botsman & Rogers, 2010), but they have received little attention in tive economy in general and crowdfunding networks in particular. First,
both the capabilities and the network management literature. Existing our literature review of the existing crowdfunding literature provides
network literature implies that the outcomes of capability deployment practitioners with a fine-grained map of these networks. In terms of
benefit the focal actor. Our findings, however, broaden the scope of structure, crowdfunding networks are open two-sided markets that
capability deployment outcomes to include the network as a beneficiary match one founder to many funders. This one-to-many matching me-
of capability deployment. More generally, this study contributes to the chanism means that founders and their initiatives must ‘stand out from
capabilities literature by making the link between capability deploy- the crowd’. Thus, when entering a crowdfunding platform, managers
ment and its outcomes, which may occur on different analytical levels, and entrepreneurs need to pay extra attention to ensuring they are
explicitly visible. visible and that their story is convincing. In addition, the crowd should
While customer engagement (e.g., Brodie, Hollebeek, Juric, & Ilic, find the crowdfunding initiatives and ventures easy to understand and
2011; van Doorn et al., 2010) and, more recently, actor engagement potentially emotionally appealing. The open nature of crowdfunding
(Alexander, Jaakkola, & Hollebeek, 2018; Brodie, Fehrer, Jaakkola & networks also means, however, that managers and entrepreneurs need
Conduit, 2019; Storbacka, Brodie, Böhmann, Maglio, & Nenonen, 2016) to pay careful heed as to what they disclose to the crowd because this
are discussed extensively in the contemporary marketing literature, the information is available to the entire crowdfunding network and to
capabilities that facilitate engagement (from the perspective of the potential competitors.
business actor) remain poorly understood. Our research indicates that Second, our proposed portfolio of four critical capabilities for op-
the full potential of crowd engagement can only be reached if founders erating and collaborating in crowdfunding networks draws attention to
relinquish control of their respective crowdfunding initiatives and give two capabilities little discussed in the network management and cap-
agency to the crowd. abilities literature: engaging and attaining social continuity. Because these
Further, because the four capability sets contribute to value creation two capabilities encompass social rather than business activities, they
for the founder and for the crowdfunding network, our research do not intuitively relate to a manager's activity set. Our research in-
broadens the perspective of value creation by taking it from a firm- dicates that building up these two capabilities is a particularly im-
centric understanding of value creation (as is dominant in the existing portant facet of operating successfully in crowdfunding networks and in
capabilities literatures) to a network-centred or systemic understanding the collaborative economy in general. Building up engaging capabilities
of value creation. The summary of the four collaborative capabilities in requires mapping and understanding the social network around the
Fig. 1 clarifies their value-creation processes with respect to two levels, venture. It means finding creative ways to reach out to loose, socially
that of the focal founder and that of the network. Visioning, which takes distant contacts, such as making the founder's story or message as
place before the founder enters the crowdfunding platform, articulates ‘shareable’ as possible, and allowing the network to share this story
the first value proposition. Dynamic business modelling results in a viable without trying to control how and when the message is being retold.
business model co-created with the crowd, while engaging the crowd Attaining social continuity capabilities requires managers and en-
leads to positive network effects that enable the crowdfunding initiative trepreneurs to become systematic about and visible while building re-
to reach its tipping point (Dubé et al., 2010; Katz & Shapiro, 1985) and ciprocal – even altruistic – relationships with the crowd. Activities fa-
from there shape a ready market. Attaining social continuity creates cilitating these requirements include acknowledging and rewarding
open-access social capital for the next crowdfunding initiative. other people who get involved with the project, helping others in re-
This consideration leads to the third substantial contribution of this turn, and sharing knowledge with other managers and entrepreneurs
research. In responding to Möller and Halinen's (2017) call for more who are part of the crowdfunding network.
research related to agency development in networks, we have been able Finally, our research highlights that agency, the capacity of the
to show that collective agency is pivotal in leveraging the potential of manager or entrepreneur to control deployment of his/her capabilities
crowdfunding networks. The locus of agency in the existing network and their outcomes, varies depending on the phase of the crowdfunding
management literature, with a few notable exceptions (Matinheikki, process and the capabilities being deployed. During the earlier stages of
Pesonen, Artto, & Peltokorpi, 2017; Ritvala & Salmi, 2010), typically the crowdfunding process, the focus on visioning agency is managerial,
resides with one central hub or a consortium of actors (Möller & meaning the manager or entrepreneur is the person most responsible
Halinen, 2017). As Matinheikki et al. (2017) point out, there is little for making decisions and making things happen. However, when the
research on specific forms of collective action and the joint decision- process moves to dynamic business modelling, agency becomes shared
making that facilitates sharing of power. between the manager or entrepreneur and the crowd. This is because
Informal social mechanisms such as mutual trust and shared values prototyping, advice-seeking and legitimizing all require the crowd's
are still under-investigated in the network management literature active involvement.
(Matinheikki et al., 2017). Our study allowed us to build on the current Agency moves even further away from a managerial to a collective
integrated understanding of social and business network structures to attribute when the crowd becomes empowered and entrusted to employ
cover the complexity of network management in crowdfunding net- extra roles and behaviours, such as making decisions and representing
works (Brown et al., 2018). the project in their broader social network. This shift from more tra-
As a result, it seems to us that the managerial agency of the founder ditional managerial agency to shared or even collective agency relies on
is predominantly present in the early stages of the network formation. managers and practitioners becoming adept at practising distributed
Again, if the crowdfunding initiative is to reach its tipping point, the leadership (Gronn, 2002), that is, enabling others to lead development
locus of agency must reside with the crowd. Collective agency is an of the crowdfunding initiative or venture.
essential facet of creating value on the network level. Our research
demonstrates that ‘engaging’ and ‘attaining social continuity’ cap- 5.3. Limitations and suggestions for future research
abilities will only reach their full potential through the collective
agency of the crowd. Our study thus broadens the theoretical under- The portfolio of collaborative capabilities for operating and colla-
standing that capabilities need to be deployed through both managerial borating in crowdfunding networks that we developed should be re-
agency and collective agency. garded as a first step of enquiry in this nascent field of research. Further
research needs to build on and validate our findings and frameworks.
13
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Caridà, A., Melia, M., & Colurcio, M. (2017). Business model design and value co-creation:
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University of Bayreuth for supporting with the data collection and in- attraction of early contributions in crowdfunding. Entrepreneurship Theory and
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to thank the University of Auckland Foundation (Grant No. 3713307) Dagnino, G. B., Levanti, G., & Mocciaro Li Destri, A. (2016). Structural dynamics and
intentional governance in strategic interorganizational network evolution: A multi-
for supporting this research.
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Vargo, S. L., & Lusch, R. F. (2016). Institutions and axioms: An extension and update of Julia A. Fehrer is Lecturer in Digital Marketing at the University of Auckland Business
service-dominant logic. Journal of the Academy of Marketing Science, 44(1), 5–23. School (New Zealand) and Research Fellow in Marketing & Service Management at the
Weick, K. E. (1995). Sensemaking in organizations. 3. London: Sage. University of Bayreuth (Germany). Her research focus includes actor engagement in
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, networks, systemic business models, market shaping and systemic innovation. Her re-
5(2), 171–180. search has been published in journals such as the Journal of Service Research, Industrial
Wilden, R., Devinney, T. M., & Dowling, G. R. (2016). The architecture of dynamic Marketing Management and the Journal of Service Management She has twelve years of
capability research identifying the building blocks of a configurational approach. The professional experience with senior positions in marketing across countries in the in-
Academy of Management Annals, 10(1), 997–1076. surance industry. Her expertise in strategy development and customer relationship
Winter, S. G. (2000). The satisficing principle in capability learning. Strategic Management management ensures managerial relevance and a theorizing process that resonates with
Journal, 21(10−11), 981–996. industry experts.
World Economic Forum (2016). Alternative Investments 2020 The Future of Capital for
Entrepreneurs and SMEs. from http://www3.weforum.org/docs/WEF_AI_FUTURE.
pdf. Suvi Nenonen is Professor and the Director of the Graduate School of Management at
Yalcinkaya, G., Calatone, R. J., & Griffith, D. A. (2007). An examination of exploration University of Auckland Business School (New Zealand). Her research interests include
and exploitation capabilities: implications for product innovation and market per- markets and market-shaping, business model innovation, service innovation, and co-
formance. Journal of International Marketing, 15(4), 63–93. creation. Her research has been published in journals such as Industrial Marketing
Yang, Y., Wang, H. J., & Wang, G. (2016). Understanding crowdfunding processes: A Management, European Journal of Marketing, Marketing Theory, British Journal of
dynamic evaluation and simulation approach. Journal of Electronic Commerce Management, and Management Decision.
Research, 17(1), 47–66.
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Industrial Marketing Management

Crowdfunding networks: Structure, dynamics and critical capabilities

ARTICLE INFO ABSTRACT

Table 2 networks. Most of the literature focused on network, dynamic, en-

Blogs on crowdfunding are numerous and provide a rich source of

3. Methodology 3.2. Research process and data analysis

Giving back Generating open

Crafting Roadmapping Agility- Prototyping Attracting

DYNAMIC Viable Ready

Fig. 1. Collaborative capabilities in crowdfunding networks.

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