Crowdfunding: Geography, Social Networks, and the Timing of Investment Decisions
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Catalini-Christian.pdf
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Author(s)
Agrawal, Ajay
Catalini, Christian
Goldfarb, Avi
Date Issued
June 2015
Journal
Journal of Economics & Management Strategy
Publisher
Wiley Blackwell
Citation
Agrawal, Ajay, Christian Catalini, and Avi Goldfarb. “Crowdfunding: Geography, Social Networks, and the Timing of Investment Decisions.” Journal of Economics & Management Strategy 24, no. 2 (May 4, 2015): 253–274.
Version
Author's final manuscript
Abstract
We examine a crowdfunding platform that connects artists with funders. Although the Internet reduces many distance-related frictions, local and distant funders exhibit different funding patterns. Local funders appear less responsive to information about the cumulative funds raised by an artist. However, this distance effect appears to proxy for a social effect: it is largely explained by funders who likely have an offline social relationship with the artist (“friends and family”). Yet, this social effect does not persist past the first investment, suggesting that it may be driven by an activity like search but not monitoring. Thus, although the platform seems to diminish many distance-sensitive costs, it does not eliminate all of them. These findings provide a deeper understanding of the abilities and limitations of online markets to facilitate transactions and convey information between buyers and sellers with varying degrees of social connectedness.
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1111/jems.12093
