Recently, Professor Xue Weili from the Department of Logistics Management Engineering, School of Economics and Management, along with his collaborators, published an academic paper titled Reward-Based Crowdfundingvs. Initial Coin Offerings in the UTD24-ranked journal Production and Operations Management.
The paper primarily explores the fundamental differences between reward-based crowdfunding and ICO (Initial Coin Offering) crowdfunding from the perspective of agency costs. It also offers insights for entrepreneurs on selecting the most suitable financing model. Reward-based crowdfunding and ICO crowdfunding are two prevalent methods through which entrepreneurs secure funding from consumers to support the development or production of new products. ICO crowdfunding, in particular, is an innovative financing platform model based on blockchain technology. However, determining the appropriate choice between these two models presents a critical practical challenge for entrepreneurs.
Key Findings
The research highlights the following:
Differences in Agency Costs
The distinction between reward-based crowdfunding and ICO crowdfunding lies in their sources of agency costs. Reward-based crowdfunding resembles debt financing, where pre-sale participants are compensated, with agency costs mainly arising from relatively low pre-sale product prices. On the other hand, ICO crowdfunding resembles equity financing, where token investors are compensated, and agency costs primarily stem from relatively high product sales prices.
Influencing Factors
Product costs and platform traffic significantly impact agency costs, which in turn affect entrepreneurs’ decisions regarding financing models.
Practical Recommendations
Based on these factors, the paper provides practical recommendations for entrepreneurs to select the optimal financing model. The findings are further validated through successful entrepreneurial projects, offering a theoretical framework to better understand the distinctions between reward-based crowdfunding and ICO crowdfunding.
This research not only elucidates the differences between these two financing models but also lays the foundation for future studies on managing blockchain-based distributed platforms.
Significance and Contributions
Platform operations management is a core research area within the field of management science and engineering. This accomplishment marks the second publication by the management science and engineering team of the School of Economics and Management in a UTD24-ranked journal this year. The team remains committed to a research philosophy of "reaching for the sky while staying grounded," striving to enhance the discipline's development and contribute valuable insights to national strategies and societal progress.
Original link:https://journals.sagepub.com/doi/abs/10.1177/10591478241245139
Contributed by: the Department of Logistics Management Engineering
Translated by: Cui Xuerong
