Unveiling the role of entrepreneurial teams in the equity crowdfunding journey

Abstract

Despite the rapid spread of equity crowdfunding, the role and actions played by entrepreneurial teams in this context have been neglected; the few studies in this field adopted a static view and focused primarily on their signaling role in equity crowdfunding campaigns, compared to solo founders. This study adopts a dynamic view and extends current literature by exploring the underlying dynamics and the role of entrepreneurial teams in the entire equity crowdfunding journey. Our findings reveal that entrepreneurial teams play a crucial role in three phases of equity crowdfunding, namely, the pre-campaign, during the campaign, and post-campaign phases. In the first phase, entrepreneurial teams are crucial in enhancing entrepreneurial alertness, social media use, social capital, entrepreneurial openness, and reducing the perceived uncertainty. The analysis shows that entrepreneurial teams are determinant for the success of the equity crowdfunding campaigns for human capital signals, certifications, social media use, and increased social capital and communication activities. Finally, the results highlight that entrepreneurial teams have valuable importance in the post-campaign phases in terms of crowd involvement/management, social capital and knowledge/network exploitation, improved resource mobilization, and resilience/robustness. Notably, social capital has a dynamic effect on equity crowdfunding activities over time. The results of this research have several implications for theory and for practice. We also discuss the implications of our findings for adopting a team approach, for small businesses undertaking the equity crowdfunding journey, and for other actors including platform managers and prospective investors.

Top Management Team Stability and Corporate Innovation Sustainability

“…At the same time, this signal also alleviates the information asymmetry between enterprises and financial institutions, lowering enterprise financing costs [28]. Furthermore, a stable TMT can boost the firm's social capital [18], expand its financing channels, and lessen its financing concentration [28]. However, an unstable TMT increases the uncertainty of the business operations [38], causing the firm to lose the guarantee of future payment to creditors [57], as well as making it harder to pay dividends to shareholders.…”

“…Based on the signaling mechanism, a stable TMT is a signal that the interests of external investors and creditors can be guaranteed, which can ease corporate financing constraints and promote innovation sustainability. According to recent research, external investors prioritize the size and cohesion of the entire executive team over individual executives [18,55]. A stable TMT signals to the capital market a firm's stable operations and promising business prospects, thus strengthening its financial reputation [56].…”

“…Taken together, a stable TMT signals to creditors and investors that the enterprise is operating stably and in good condition, reducing their risk perception. External fund providers are also more likely to contribute financing to firms with relatively stable and cohesive executive teams [18,60]. Ultimately, the alleviation of financing constraints enables enterprises to invest more funds in innovation activities and enhance the sustainability of innovation.…”

“…In actuality, a single executive has less influence over the firm than the entire executive team [18]. The quality of the executive team's decision making is also primarily determined by the team's stability [19].…”

“…The current literature indicates that a stable TMT can improve corporate performance and competitive advantage [19,24,25], adhere to long-term value orientation [19], and actively assume social responsibility [26]. Furthermore, a stable TMT will lower firms' default risk and debt concentration [27,28], allowing them to cope with external uncertainties and receive more funding [18]. Therefore, it is necessary to advance the existing literature and explore the relationship between TMT stability and corporate innovation sustainability, as well as the corresponding influencing mechanisms.…”