Kicking Off Social Entrepreneurship: How A Sustainability Orientation Influences Crowdfunding Success

• Date: 01 July 2016
• Author: Goran Calic,Elaine Mosakowski
• DOI: http://doi.org/10.1111/joms.12201
• Published date: 01 July 2016

Kicking Off Social Entrepreneurship: How A

Sustainability Orientation Influences Crowdfunding

Success

Goran Calic and Elaine Mosakowski

McMaster University; University of Tasmania

ABSTRACT Research generally suggests that, relative to commercial entrepreneurs, social

entrepreneurs stand at a disadvantage at acquiring resources through traditional financial

institutions. Yet interest in social entrepreneurship appears to be at an all-time high. The

current paper advances the argument that an innovative institutional form – crowdfunding –

has emerged to address the needs of social entrepreneurs and other entrepreneurs with limited

access to traditional sources of capital. To examine this, we study whether and how a

sustainability orientation affects entrepreneurs’ ability to acquire financial resources through

crowdfunding and hypothesize that a venture’s sustainability orientation will enhance its

fundraising capability. We also suggest that project legitimacy and creativity mediate the

relationship between a sustainability orientation and funding success. Our analysis produces

two key findings: 1) a sustainability orientation positively affects funding success of

crowdfunding projects, and 2) this relationship is partially mediated by project creativity and

third party endorsements.

Keywords: creativity, crowdfunding, entrepreneurship, legitimacy, social entrepreneurship,

sustainability

INTRODUCTION

While social entrepreneurship activities continue to grow in importance and number

(Lumpkin et al., 2013; Margolis and Walsh, 2003; McMullen and Warnick, 2015; Zahra

and Wright, 2015), access to resources constrains the founding and growth of socially-

oriented organizations. Austin et al. (2006) suggest that, compared to profit-focused or

commercial ventures, social ventures face difficulties in resource mobilization. Their rea-

soning is that ‘the nondistributive restriction on surpluses generated by nonprofit organi-

zations and the embedded social purpose of for-profit or hybrid forms of social

Address for reprints: Goran Calic, DeGroote School of Business, McMaster University, Hamilton, Ontario

L8S-4M4, Canada (gorancalic@gmail.com).

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C2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

Journal of Management Studies 53:5 July 2016

doi: 10.1111/joms.12201

enterprise limits [sic] social entrepreneurs from tapping into the same capital markets’

(Austin et al., 2006, p. 3). Whereas commercial entrepreneurs can attract the attention

of commercial lenders or private equity investors, social entrepreneurs often appear less

attractive to traditional capital providers. Such curtailed access to resources becomes

especially onerous when social ventures need capital to invest in commercial activities

that generate earned income.

The dearth of support from capital markets stands in contrast to the increasing soci-

etal support for social entrepreneurs. The popularity of books like David Bornstein’s

(2007) How to Change the World: Social Entrepreneurs and the Power of New Ideas is one illustra-

tion of how popular culture has embraced the notion of social entrepreneurship. Writing

from broader sociological and historical perspectives, Meyer (2010, p. 6) goes on to

describe those social changes that encouraged the rise of social entrepreneurship:

Many of the social structures that expanded rapidly in the postwar world are con-

spicuous for their absence of claimed selves and interests and for their claimed

agency for such universal or highly collective goods as world peace, the environ-

ment, human rights, or models of economic growth (Meyer and Jepperson, 2000).

And their social authority derives from their disinterested reflection of transcending

purposes, not from their own interests. Adopting the stance of rising above the self,

they are not mainly interested actors, so much as Others, in the old Meadian sense,

and they derive their agentic authority from roots that would once have been con-

sidered religious.

With traditional financial institutions being generally incompatible with ventures that

seek to ‘rise above the self’, it is reasonable to predict the emergence of new financial

institutions that parallel societal support for social entrepreneurship. We suggest that

this has happened in the form of a relatively novel and increasingly important source of

capital: crowdfunding. With the needs of social entrepreneurs being unmet or under-

served by traditional capital markets, crowdfunding offers a distinct avenue for acquir-

ing resources that may exhibit a preference for funding social entrepreneurs over

commercial-only entrepreneurs.

Over five billion dollars was raised on crowdfunding platforms in 2013 – a 188 per

cent growth rate over 2012 (Montini, 2014). While entrepreneurial funding by a loose

collection of individuals is not new, recently developed on-line crowdfunding platforms

introduce an institutional setting that differs from that of traditional funding sources.

Crowdfunding platforms create financial opportunities for early-stage entrepreneurial

ventures with little track record or little available data, while simultaneously increasing

the anonymity of the relationship between funders and entrepreneurs and democratiz-

ing the financial decision by drawing upon a large number of relatively small contribu-

tions (Mollick, 2014; Ordanini et al., 2011). Some platforms, such as Kickstarter, are

reward-based and, as a result, move away from the traditional model of investors either

acquiring equity in, or making a loan to, a venture. For reward-based crowdfunding,

backers’ motivations shift from pecuniary returns to other types of benefits.

Based on these institutional characteristics of crowdfunding, the current paper pro-

poses that, contrary to the findings for traditional capital markets, entrepreneurs with a

739Kicking Off Social Entrepreneurship

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C2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies