Foundations and Trends® in Technology, Information and Operations Management > Vol 14 > Issue 1–2

Financing Inventory Through Initial Coin Offerings (ICOs)

Rowena Jingxing Gan, The Wharton School, University of Pennsylvania, USA, ganj@wharton.upenn.edu , Gerry Tsoukalas, The Wharton School, University of Pennsylvania, USA, gtsouk@wharton.upenn.edu , Serguei Netessine, The Wharton School, University of Pennsylvania, USA, netessin@wharton.upenn.edu
 
Suggested Citation
Rowena Jingxing Gan, Gerry Tsoukalas and Serguei Netessine (2020), "Financing Inventory Through Initial Coin Offerings (ICOs)", Foundations and Trends® in Technology, Information and Operations Management: Vol. 14: No. 1–2, pp 60-76. http://dx.doi.org/10.1561/0200000096-4

Publication Date: 01 Oct 2020
© 2020 Rowena Jingxing Gan, Gerry Tsoukalas and Serguei Netessine
 
Subjects
Business Process Engineering and Design,  Capacity Planning,  E-Commerce and E-Business Models,  Electronic markets, auctions and exchanges,  Financial Services,  New Product & Service Design,  Supply Chain Management,  Technology Management and Strategy
 

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In this article:
1. Introduction
2. Model
3. Analysis
4. Discussion: ICOs vs. Other Early-Stage Financing Methods
5. Conclusions
References

Abstract

Initial Coin Offerings (ICOs) are an emerging form of fundraising for Blockchain-based startups. We propose a simple model of matching supply with demand with ICOs by companies involved in production of physical products. We examine how ICOs should be designed—including optimal token floating and pricing of utility tokens—in the presence of product risk and demand uncertainty, make predictions on ICO failure, and discuss the implications on firm operational decisions and profits. We show that in the current unregulated environment, ICOs lead to risk-shifting incentives (moral hazard), and hence to underproduction, agency costs, and loss of firm value. These inefficiencies, however, fade as product margin increases and market conditions improve

DOI:10.1561/0200000096-4
ISBN: 978-1-68083-722-3
248 pp. $99.00
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ISBN: 978-1-68083-723-0
248 pp. $280.00
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Table of contents:
Advances in Supply Chain Finance and FinTech Innovations Book Overview
Part 1: Financing Issues in Supply Chains
Trade Credit in Supply Chains: Multiple Creditors and Priority Rules
Guarantor Financing Selection Under Influence of Supply Chain Leadership and Economies of Scale
Inventory and Financial Strategies with Capital Constraints and Limited Joint Liability
Part 2: FinTech Innovations for Supply Chains
Financing Inventory Through Initial Coin Offerings (ICOs)
Renewable Identification Numbers: A Supply-Chain Risk View
Part 3: Advances in Risk Management of Operational Systems
Managing Disruption Risk Over the Product Life Cycle
Production Planning with Inventory-Based Financing
Achieving Efficiency in Capacity Procurement
The Term Structure of Optimal Operations
Least Squares Monte Carlo and Approximate Linear Programming with an Energy Real Option Application

Emerging Advances in Supply Chain Finance and FinTech Innovations

Advances in Supply Chain Finance and FinTech Innovations examines three themes:

Financing Issues in Supply Chains look into popular working capital management financing practices: trade credits and guarantor practices including advanced trade credit practices in supply chains, guarantor financing practices for capital constrained retailers, and innovative practices of joint financing of capital constrained firms by a bank.

FinTech Innovations for Supply Chains examines business model innovations for supply chain financing supported through new platform technologies (such as blockchain), and simple financial technologies effectively implemented for high impact in supply chain risk management.

Advances in Risk Management of Operational Systems provide state-of-the art thinking on many risk issues in supply chain operations including disruption strategies over the product life cycle, the production planning complexities for a capital constrained manufacturer that uses Inventory Based Financing (IBF) scheme to fund its working capital needs, capacity procurement decision, capacity planning in the presence of demand and price uncertainty, and valuing complex real options in dynamic operational settings.

 
TOM-096-4

Companion

Foundations and Trends® in Technology, Information and Operations Management, Volume 14, Issue 1-2 Special Issue: Advances in Supply Chain Finance and FinTech Innovations
See the other articles that are also part of this special issue.