tap this potential. Said analogy between the old fundraising and the new Crowdfunding leads us to another interesting point: An adequate number of contributors can only be activated in case of a common interest. In the case of Crowdfunding this interest
normally is the attempt to bring a really innovative product to market. These aspects of a definition clearly show how strong Crowdfunding and Crowdsourcing are related.
Hence, the thesis of this paper seems to be prolific.
Beyond the above mentioned aspects of a definition of Crowdfunding some conceptual points help gain a deeper insight into the phenomenon. A question which needs to be addressed first of all is whether contributors get any kind of reward or not.
This really striking point leads us to a differentiation within Crowdfunding. The act of outsourcing questions of financing can be realised by initiating Crowdfunding,
Crowddonating, Crowdlending or Crowdinvesting projects. Crowdfunding in this regard is quite similar to Crowddonating, because no rewards, voting rights or the like are guaranteed to the donators. In some cases they get incentives, thankful mentions or a gift coupon for upcoming products or services. Contrary to this form of online gift making, Crowdlending is much more related to the conventional credit system.
Crowdlending is a form of peer-to-peer crediting, consequentially the money has to be paid up to the lenders (either without or with interest). Once again, unlike the different models referred to above, Crowdinvesting explicitly grants financial rewards (such as shares of the company or gain sharing) and a voice in the meeting of shareholders or alike (Applehoff et al. 2013). Some authors, like Bradford (2013), prefer deviant
categorisations, such as the donation model, the reward model, the pre-purchase model, the lending model and the equity model. In fact, both classifications in categories are based upon the same issues, albeit named differently. When Belleflamme et al. (2012a) compared these forms of Crowdfunding they found out that entrepreneurs prefer
conventional Crowdfunding if the initial capital requirement is relatively small, and Crowdinvesting if the required capital is much higher.
Kappel (2009) makes a distinction between ex post facto Crowdfunding and ex ante Crowdfunding. The first type of this differentiation takes place whenever financial support is offered for products which are ready for production, e.g. when an innovative smartphone is already functioning, but needs some money for the production of a first small batch series. Ex ante Crowdfunding refers to projects that only consist of an idea, such as the production of a band’s debut album. The participants, therefore, hope to achieve a mutually desired result, but have no guarantee of success. Ex ante
Crowdfunding is often used in the entertainment industry by independent filmmakers, artists, writers, and performers to bypass traditional keepers of the purse, while the ex post facto model is usually found in relation to physical products. Furthermore,
Belleflamme et al. (2010) show that Crowdfunding projects initiated by non-profit associations are far more likely to achieve their target level of capital than
corporations. Hazen (2012)) adds one more dimension of differentiation: the extent to
which the initiative is embedded. Initiatives are single and independent when they have no background in an institution or are set up by individuals. Projects can also be
initiated by and embedded in private or public organisation with the intention of remaining part of this organisation. And thirdly, projects may begin as independent start-ups, but will be transformed into a firm or organisation after succeeding the founding process.
As stated above, to date no all-embracing definition and conceptualisation has been formulated. In view of the fact that Crowdfunding is both a new and dynamic
phenomenon, this is not surprising. The questions analysed so far, however, give an impression of how Crowdfunding can be discussed in terms of social science in general and sociology in detail. This concept of Crowdfunding will underlie the following theoretical framing and hypothesis to be discussed.
3 Theoretical Background
Crowdfunding did not emerge by chance but rather as a consequence of multiple
societal and economic developments. Three striking processes within the last decades need to be mentioned in this respect. On the level of theory of society the rise of the network and information society as well as an increase in mediated communication via Internet needs to be stated. As far as the economic perspective is concerned, it is
evident that more and more functions and activities are outsourced, initially to subcontractors and other companies, meanwhile to customers and users. The third development ties in with this process. Areas which used to be clearly separated, e.g.
production and consumption, have, in the recent past started to merge. Because of this, new roles and social figures have come into being such as the working customer (Voß and Rieder, 2007), the working user (Papsdorf, 2009) or the investing user. In the context of online communication such new hybrids seem to have developed
exceptionally easily. Crowdfunding is only one of many Web 2.0 innovations which transform formerly passive consumers into active users. Especially those
transformations related to the business world have rightly been criticised because of the fact that the working user does not receive appropriate payment for any work done (Kleemann et al., 2008). This and other drawbacks of Crowdfunding need to be discussed here in order to get a complete picture.
To begin with, the rise of the network and information society and an increase in mediatised communication via the Internet some reflections from a macrosociological perspective are unavoidable. As Bell (1973) already diagnosed, industrial societies are transforming into information societies. This leads to changes not only in economies but in the whole complex of social structures. Crucial for these rearrangements is a new hegemony of theory over practice. Accordingly, scientists displace capitalists as major figures in modern societies. These assumptions are fortified by Castells’ (2001) thesis of the network society, which is characterised by a consequent application of
knowledge and information as resources and accelerated coupling of technological and societal development. Three processes are at the basis of the network society: The revolution of information technologies (especially the Internet), the restructuring of (global) capitalism in reaction to the crisis in the 1970s and liberalism-oriented social movements made individualised and decentralised utilisation of new technologies possible. As Castells (2005) adds later on, the Internet transforms practices in nearly all fields of economy. This includes the relationship with suppliers and customers, manufacturing processes, relationships to other companies or financing and investing in stocks. This shows that there is a close correlation between considerable societal
changes and new forms of communication. By mediating more and more communication via the Internet preconditions, operating modes and consequences of communication in general are being converted. So online communication is necessarily digital,
networked, irrespective of time and space, modular, automated, open and distinguished
by user participation (Papsdorf, 2012). On the one hand these developments are significantly driven by economics whereas on the other hand they also affect them.
Essential conditions for the emergence of Crowdfunding can also be found in the field of economics. One trend is to increasingly externalise more and more functions.
Inasmuch as the act of outsourcing is well-known, here only a new variation of this strategy is to be presented. The Internet in particular enables the outsourcing of
functions of organisations, not only to subcontractors, but also to individuals among the crowd of web user. Therefore, not only sections like customer relationship, production or quality management, but equally compartmentalised tasks, like beta testing, mass customisation, innovation or content generation are delegated to the crowd. Although Crowdsourcing actually is (and probably will stay) of little societal importance, hundreds of thousands companies must be considered a success story. Before describing the user’s role in detail, a second process related to this needs to be discussed, i.e. the transition from closed to open to user innovation.
Well in the nineteenth century enterprises developed innovations and inventions largely autonomously, also independent of university research. The early innovative entrepreneur, as shown by Schumpeter (1950), was a capitalist, who continually sought to conceal research and development, whereas in open innovation-models, companies seek cooperation with research establishments, start-ups, suppliers, competitors or even customers (Chesbrough, 2003). This state changed rapidly due to the fact that the economic environment of enterprises became more and more capable of innovation.
Cooperation and at least a partial opening became essential. Recently, companies have discovered that customers can be a valuable source of ideas and innovations. Hence, user innovation stands for a process of systematic investigation and integration of
users’ knowledge and creativity with the use of modern information and communication technology. These strategies seem to promise competitive advantages, such as reducing the time between invention and market launch, a reduction of incidental costs (by
outsourcing) and raising market acceptance.
These changes which originally began in the offline world and now show a
noticeably greater dynamism due to Internet communication, have given rise to entirely new, hybrid roles like working customers, working users or investing, respectively donating users. The working customer has become a well-known phenomenon if we think of, for example, self-service technologies (e.g. in restaurants or at ticket
machines) or furniture that has to be assembled at home. With online banking or
Crowdsourcing, we have a clear case of the working user. Investing and donating users, on the other hand, represent a brand new phenomenon that certainly affiliates to the logic of the previous hybrids. These developments have recently been challenged. This new wave of capitalistic colonisation (Papsdorf, 2009) has been subjected to
considerable criticism. On the one hand, enterprises exploit the leisure time and the privacy of users. On the other hand, users are either underpaid or do not receive any
payment at all. Also, apart from a direct remuneration, users are disadvantaged in contrast to companies, as rights of intellectual property, which are relevant in case of idea or design competitions, or bare comments on new business ideas or on innovative products, descend to corresponding companies or intermediate platforms.
Consequently, more and more regular jobs are replaced by Crowdworkers.
In summary, Crowdfunding seems to be a logical consequence of societal,
economic and technical developments. While the technological potentials of Web 2.0 accomplished the necessary prerequisites, an increasing interconnection of the world and the mediatisation of communication as well as the manifold outsourcing strategies induced a social climate that accentuates cooperation in projects and innovative
thinking as undoubted state of the art (Boltanski and Chiapello, 2003). In this context, a number of Web 2.0 projects came up, such as wikis, open source publications,
podcasts, social network sites, platforms for pictures and videos, as well as economic projects in the narrow sense, like Crowdworking, Crowdfunding or Cloudworking. As Boltanski and Chiapello (2003) show, these types of projects always have a downside, inasmuch as requirements of individuals are exploited by companies and individuals are being badly paid. The following section will demonstrate how those theoretical issues help paint a clear picture of Crowdfunding.