Abstract

The aim of the article. The object of the article is economic potential of crowdfunding which is one of such modern financial instruments. The research aims to study the efficiency of using crowdfunding as an innovative financial instrument by determining its advantages over traditional methods of finance for projects of social and economic development. The results of the analysis. The rapid development of the Internet environment has given impetus to the emergence of new forms of entrepreneurship as well as various forms of electronic fundraising. New forms of finance are based not on government guarantees or initial capital but on the base of public participation. In the study authors have designed the classification of contemporary types of crowdfunding on the criteria of rewards for participants. They are also highlighted the features of Internet crowdfunding, which make it an effective innovative method to finance projects. These are flexibility which is shown in different cases, ability to produce local public goods, transaction costs reduction, integration of the common interests of community members. Internet platforms gave to crowdfunding new meaning which is different from the traditional forms of collective financing that existed before. With innovative characteristics crowdfunding is transforming into an effective instrument for financing projects of social and economic development in various areas of society. Nowadays plenty of innovative projects related to the development of information technology are also funded via crowdfunding. The analysis allows put forward a hypothesis that the most effective methods of financing modern innovations related to the same environment where they are operating – information space represented by the Internet and social networks. Conclusions and directions of further researches. Due to crowdfunding not only individual entrepreneurs but also the whole territorial communities have the opportunity to join forces for solving problems of local growth. At the present time local communities take their first steps in the using network technologies for financing projects of social and economic development. To improve the efficiency of this tendency further researches in two directions are required. The first direction is related to the marketing of crowdfunding and the second one is connected with the formation of specific social characteristics within communities which allow them effectively use the instruments of collective financing.

Keywords: finance, crowdfunding, innovation, social and economic development, local community

JEL Classification: G02, G18, O16, O18.

Cite as: Petrushenko Yu. & Dudkin, O. (2014). Crowdfunding as an innovative tool for financing projects of social and economic development. Marketing and Management of Innovations, 1, 172-182. https://doi.org/10.21272/mmi.2014.1-17

This work is licensed under a Creative Commons Attribution 4.0 International License

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