Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200661 
Year of Publication: 
2019
Series/Report no.: 
Hannover Economic Papers (HEP) No. 649
Publisher: 
Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät, Hannover
Abstract: 
In a game theoretical setting, this paper studies the entrepreneur's decision making by using a new financing opportunity referred to as crowdinvesting. In this model, the entrepreneur can collect money and advertise his innovative idea. However, crowdinvesting carries the risk of being copied by a potential competitor. Faced with this trade-off, the entrepreneur strategically diminishes his marketing activity under certain circumstances to remain the monopolist in the market. In the second part, we compare crowdinvesting with two alternative financing opportunities, banks and venture capital. We show that crowdinvesting, often mentioned as a financing instrument for drastic innovations, is generally not appropriate for these ideas because the danger of being copied is too high for the entrepreneur.
Subjects: 
Crowdinvesting
equity crowdfunding
entrepreneurship
advertising
idea stealing
JEL: 
D21
G32
L26
M13
O13
Document Type: 
Working Paper

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