The Study on the Difference in Corporate Performance and Employment Outcomes According to the Results of Equity-Based Crowdfunding Investment

Abstract

The purpose of this study is to identify the difference in firm performance and employment growth between successful and failed capital procurement through equity-based crowdfunding. We conduct an empirical analysis using entire crowdfunding projects that attempted to raise capital through equity-based crowdfunding in South Korea in 2016. We summarize our findings as follows. Descriptive statistics show that the survival rate, sales growth rate, profitability growth, absolute employment growth, and employment growth rate of companies with successful crowdfunding are higher than those of companies with failed crowdfunding. However, from the difference analysis, we do not find a significant difference in the survival rate, sales growth rate, and profitability growth between companies with crowdfunding success and companies with crowdfunding failure. We find that the absolute employment growth and employment growth rate are significantly higher for companies that succeeded in crowdfunding projects compared to companies that did not. In this study, we find that the characteristics of these firms that are conducting or verifying new projects through equity-based crowdfunding financing are similar to those of prior studies results confirming the short-term effects of entrepreneurial activities or new business activities on economic performance and employment growth. In particular, it is very meaningful to confirm that the direct effect of employment growth is also found in start-up firms that raise capital through equity-based crowdfunding. By investigating the difference in firm performance and employment outcomes according to the results of equity-based crowdfunding investment, this study provides useful insights to investors for their efforts to validate participation in crowdfunding. Also, our study raises important policy implications for regulators in their efforts to resolve unemployment and the lack of capital problem for startups and new businesses.

How Does Technology Startups Increase Innovative Performance? The Study of Technology Startups on Innovation Focusing on Employment Change in Korea

“…The studies of the impact of technology startups on employment mostly have focused on the role of job creation [6,8,12]. One study showed that job creation turned out to be higher in knowledge services sectors than manufacturing industries [13].…”

A systematic literature review of startup survival and future research agenda

“…In innovation, constructs like level of innovation (Gartner et al , 1999; Fritsch and Schindele, 2011; Tsvetkova et al , 2014; Hyytinen et al , 2015) and form of innovation such as product, process and organisational innovation (Xi et al , 2020) were discussed in eight studies. In employment, constructs like the level of employment (Huynh et al , 2012; Baptista et al , 2014; Lerner et al , 2018), employment density (Saboe and Condliffe, 2020) and employment outcomes such as absolute employment growth and employment growth rate (Wagner, 1994; Fritsch et al , 2006; Fritsch and Schindele, 2011; Cho et al , 2019) were discussed in seven studies. The impact of the sector of activity of the firm (Navarro, 2018; Caliendo et al , 2020; Del Sarto et al , 2020) was examined in six studies.…”

Start-up Performance: Looking for an Explanation in Entrepreneurial Characteristics and Financing Choice

“…Some studies (2018) find that equitycrowdfunded firms have a higher failure rate than non-equity-crowdfunded firms, which can be caused by adverse selection problems (Walthoff-Borm, Vanacker, and Collewaert, 2018). Other studies find that survival rate, sales growth, employment growth and revenues are higher for start-ups with a successful crowdfunding campaign than for companies with failed crowdfunding (Cho, Park, and Sung, 2019).…”