Author Information : Todd Moss (Whitman School of Management, Syracuse University)
Donald O. Neubaum (College of Business, Oregon State University)
Moriah Meyskens (School of Business, University of San Diego)
Year of Publication : Entrepreneurship Theory and Practice (2015)
Summary of Findings : Results indicate that microenterprises, which signal autonomy, competitive aggressiveness, and risk-taking, are more likely to receive funding, and to receive it more quickly. Microenterprises that signal conscientiousness, courage, empathy, and warmth are less likely to get funded.
Research Questions : 1. How do entrepreneurs in developing countries frame their pitches on Kiva, affecting loan funding?
2. Are the pitches framed as investments in an entrepreneurial enterprise or a donation to charity?
What we know : Microcredit, the giving of small loans to poor people with no credit history and limited collateral, has enabled entrepreneurship and empowered women in the developing world.
Crowdfunding platforms offer a new way for individuals to attract investment they otherwise would have difficulty receiving.
Novel Findings : Ventures that frame their microenterprises as autonomous, aggressive risk takers were more likely to receive funding than those that emphasized conscientiousness, empathy and warmth.
Although the growth in crowdfunding through a microcredit website may be driven by a desire to help others, actual lending behavior points towards those microventures that are more entrepreneurial.
Implications for Society: Microventures seeking funding would be wise to frame their enterprises as autonomous, risk-taking entrepreneurial ventures.
Implications on Research: This study further extends earlier research on microcredit by analyzing a popular crowdfunding platform to determine what ventures are funded and how the framing of their pitches affects that funding.
Full Citations : Todd Moss, “The effect of virtuous and entrepreneurial orientations on microfinance lending and repayment: A signaling theory perspective” (with Neubaum, D. & Meyskens, M.), Entrepeneurship: Theory and Practice, 39(1): 27-52, 2015.
Abstract : The availability of capital for microenterprises has grown rapidly due to microfinancing platforms such as Kiva. The investment decisions of microlenders are challenged due to the limited information about the microenterprises’ characteristics and behavioral intentions. Extending signaling theory, we suggest that microenterprises’ narratives on microfinancing platforms are an important means to signal valuable characteristics and behavioral intentions to prospective lenders. Results indicate that microenterprises, which signal autonomy, competitive aggressiveness, and risk-taking, are more likely to receive funding, and to receive it more quickly. Microenterprises that signal conscientiousness, courage, empathy, and warmth are less likely to get funded. Rhetorical signaling proactiveness, conscientiousness, courage, warmth, or zeal is negatively associated with loan repayment.