Date of Award

Summer 8-15-2019

Author's School

Graduate School of Arts and Sciences

Author's Department

Business Administration

Degree Name

Doctor of Philosophy (PhD)

Degree Type



The main purpose of this dissertation is to study the emerging operations issues under financial frictions, in the contexts of supply chain finance and crowdfunding platform; and to identify the implications for individuals and businesses. In Chapter 1, "A Supply Chain Theory of Factoring and Reverse Factoring", we develop a supply chain theory of factoring (recourse and non-recourse) and reverse factoring showing when these post-shipment financing schemes should be adopted and who really benefits from the adoption. Factoring is a financial arrangement where the supplier sells accounts receivable to the factor against a premium, and receives cash for immediate working capital needs. Reverse factoring takes advantage of the credit rating discrepancy between small supplier and large retailer, and enables supplier's factoring at the retailer's rate. Given the supplier's credit rating and the trade credit term, recourse factoring is preferred when the supplier's cash investment return rate is relatively high; non-recourse factoring is preferred within certain medium range; otherwise, factoring should not be adopted. Both factoring schemes, if adopted, benefit both the supplier and the retailer, and thus the overall supply chain. Further, we find that reverse factoring may not be always preferred by suppliers among other short-term financing options (bank loans, recourse and non-recourse factoring). Retailers should only offer reverse factoring to suppliers with low, but above a threshold, to medium cash investment return rates. The optimally designed reverse factoring program can always increase the retailer's profit, but it may leave the supplier indifferent to his current financing option when followed by aggressive payment extension. Interestingly, our results suggest that it is often preferable for the retailer to extend reverse factoring to certain suppliers without any request for payment extension, and leverage the supplier's willingness to carry extra inventory that increases the overall supply chain efficiency. In Chapter 2, "Crowdfunding under Social Learning and Network Externalities", we investigate how the presence of both social learning and network externalities affects the strategic interaction between a crowdfunding firm and forward-looking consumers. In rewards-based crowdfunding, a firm (campaigner) pre-sells a new product and solicits financial contributions from the crowd (consumers) to cover production costs. When a crowdfunding product with uncertain quality is first introduced, consumers may choose to strategically delay their purchase in anticipation of product quality reviews. Our research yields three main insights. First, we find that in the presence of social learning and strong network externalities, an upward-sloping demand curve may arise. This so-called \textit{Veblen effect} occurs due to the interaction between social learning and strong network externalities. Second, we show that network externalities have important implications for the optimal crowdfunding reward choice. In particular, under strong network externalities, the optimal reward will induce all consumers to either adopt the product early or adopt the product late; whereas under weak network externalities, the consumers will possibly adopt the products in different periods. Third, we characterize the optimal reward strategy under financial constraints and quantify its impact on the optimal reward choice and the induced purchase pattern from consumers. These insights provide useful guidance on how firms can exploit the benefits of crowdfunding. In Chapter 3, "Crowdfunding vs. Bank Financing: Effects of Market Uncertainty and Word-of-Mouth Communication", we investigate a firm's optimal funding choice when launching an innovative product to the market with both market uncertainty and word-of-mouth (WoM) communication. Bank financing is a traditional source of capital for small businesses, whereas crowdfunding has recently emerged as an alternative fund-raising solution to support innovative ideas and entrepreneurial ventures. Conceivably, crowdfunding could potentially replace some of the conventional roles of bank financing, but puzzles linger over when crowdfunding is a better funding choice. We characterize the firm's optimal pricing strategies under the two funding choices (i.e., bank financing and crowdfunding), compare their performances, and investigate the corresponding implications on social welfare. Among other results, we find that the firm's optimal funding choice and pricing strategy depend critically on the market uncertainty, the WoM, and the initial investment requirement. More specifically, the firm would adopt intertemporal pricing under crowdfunding, where the exact format is determined by the WoM and market uncertainty; under bank financing, however, the firm should always charge a fixed price invariant to those parameters. Moreover, market uncertainty has a non-monotonic effect on the optimal funding choice: Bank financing is preferred only when the market uncertainty is within an intermediate range. The impact of initial investment requirement on the choice of funding schemes shares qualitatively a similar trend. Finally, contrary to the conventional wisdom, we find that more active social interactions in crowdfunding, although beneficial to the firm, may hurt consumers and even reduce social welfare.


English (en)

Chair and Committee

Panos Kouvelis Fuqiang Zhang

Committee Members

Lingxiu Dong, Dennis Zhang, Wenhui Zhao,


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