Crowdfunding for innovation: a comprehensive empirical review

Abstract Crowdfunding has emerged as a transformative alternative to traditional innovation financing. Limitations of conventional funding sources have led to increased interest in alternative financing mechanisms. Crowdfunding, leveraging online platforms, has democratized access to capital, enabling entrepreneurs to develop products and services that align with broader population needs. This paper surveys the literature, demonstrating how crowdfunding platforms have opened doors to capital for entrepreneurs who might otherwise have found it challenging to secure funding through established channels. While crowdfunding's impact on innovation is multifaceted and contingent on factors like innovation type, entrepreneur quality, and regulatory frameworks, its growth trajectory remains robust, solidifying its significance as a source of entrepreneurial finance. The study aims to (1) analyze the effectiveness of crowdfunding in bridging the funding gap for startups, (2) compare crowdfunding with other forms of entrepreneurial finance, (3) assess crowdfunding’s role in fostering innovation, (4) differentiate between crowdfunding and crowdsourcing, and (5) identify the types of innovation facilitated by crowdfunding. Effective crowdfunding implementation hinges on these factors, necessitating concerted efforts from entrepreneurs, investors, and policymakers to surmount associated challenges and harness its potential for innovation and economic growth. The findings highlight the necessity for a supportive regulatory framework and the importance of transparency and trust in crowdfunding practices. This study underscores the role of policymakers in creating an environment that fosters innovation through alternative financing. However, this study is limited by the availability of comprehensive data across different crowdfunding platforms and regions. Further empirical research is needed to generalize the findings across various contexts, deepen our understanding of crowdfunding's impact on innovation, and develop strategies to leverage the potential of crowdfunding for innovation. Graphical abstract