The Influence of Institutional Context on Crowdfunding Adoption for MSME Financing in Nigeria

Micro, Small, and Medium Enterprises (MSMEs) in developing countries face exacerbated financial difficulties due to structural barriers, such as biased evaluations by traditional financial institutions, inadequate collateral, and systemic exclusion from formal lending channels (Ina Ibor et al., 2017). Over the last decade, crowdfunding has emerged as a promising alternative financing option, offering a more inclusive pathway to increase MSMEs’ access to finance, in the face of persistent funding challenges. However, adoption in developing economies has been slow necessitating the exploration of factors to promote it. Hence, the factors that influences MSMEs’ adoption of crowdfunding remains an enduring issue of interest in entrepreneurial finance research. Recent studies suggest that institutional context plays a critical role in facilitating crowdfunding adoption through the development of a viable crowdfunding ecosystem. Yet this relationship is yet to be investigated at a holistic level. While some studies have explored the impact of different dimensions of institutions on crowdfunding (Kshetri 2018; Agrawal and Jethy, 20214), only few studies have considered crowdfunding adoption through a multidimensional institutional context that considers a wide range of institutions (Kshetri, 2015; Kukk and Laidroo, 2020; Demiray et al., 2021). However, the said studies focused on the influence of these institutions on funders’ engagement, platform volumes and trust. The present study is different as it focuses on MSMEs’ adoption of crowdfunding through a mediating ecosystem perspective. Therefore, drawing on institutional theory, the study investigates the influence of institutional context on the adoption of crowdfunding for financing MSMEs in Nigeria. It examines how the regulatory, cultural-cognitive, and normative dimensions of institutional context impact crowdfunding adoption by MSMEs, with the mediating role of crowdfunding ecosystem viability. The study employs an institutional theory framework and a sequential explanatory triangulation mixed-method approach. Quantitative data was collected through a survey of 599 MSMEs across four states in Nigeria using a stratified random sampling technique. Qualitative data was gathered through semi-structured interviews with 10 MSME owners consistent with the pragmatic research paradigm. The Partial Least Square Structural Equation Modelling (PLS-SEM) was used to analyse the quantitative data through SmartPLS version 4. The Statistical Package for Social Scientists (SPSS) was also deployed to perform Exploratory Factor Analysis (EFA) to validate the variable items given its ability to provide robust output from a principal component analysis. Regarding the qualitative data, thematic analysis was deployed. The research identified institutional factors that impact the adoption of crowdfunding as an alternative financing option by Nigerian MSMEs. The findings indicate that cultural-cognitive and normative institutional dimensions significantly influence MSMEs' perceptions and behaviours towards crowdfunding, while the regulatory dimension insignificantly influences crowdfunding adoption. This implies that institutional dimensions, particularly cognitive and normative contexts, effectively determines MSMEs' adoption of crowdfunding, addressing a gap in empirical research on the influence of such institutions on MSMEs’ willingness, attitudes and perceptions towards crowdfunding method of financing. Additionally, the study found that the viability of the crowdfunding ecosystem significantly impacts adoption and partially mediates the relationship between institutional context and crowdfunding adoption. Therefore, the potential for legitimacy through supportive rules, norms, and a robust ecosystem positively shapes MSMEs' perceptions of crowdfunding. This implies that factors such as trust in digital financial services, cultural attitudes, societal perceptions and supportive platforms were found to motivate MSMEs to consider crowdfunding. The study contributes to the limited research on the role of institutional context in crowdfunding adoption, by establishing the role of institutions in providing legitimacy to the adoption of crowdfunding, particularly in Nigeria. Additionally, the study makes significant methodology contribution by deploying sequential explanatory triangulation mixed-method, where the qualitative method complements the quantitative method to minimise the weaknesses of each other, thereby enriching the outcome of the study. Finally, the study provides significant insights for policymakers and practitioners regarding the interrelationships between institutional dimensions and the adoption of crowdfunding in Nigeria. It emphasises the imperative of establishing a conducive institutional environment and a robust crowdfunding ecosystem to enhance Nigerian MSMEs' capacity to access financial resources through crowdfunding platforms.

Name dc:type.qualificationname

PhD

Level dc:type.qualificationlevel

Doctoral

Grantor dc:publisher.institution

De Montfort University

Year dc:date.issued

2024

Author dc:creator

• Oladejo, Oyerinmade Roseline

Licence

• https://dora.dmu.ac.uk/bitstreams/e85f5b1f-9fbc-4148-95f6-817321b0197d/download