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The effect of lead investors’ trustworthiness on funding performance: The moderating effect of investment-specific human capital

Author

Listed:
  • Zhang, Ye
  • Hughes, Mathew (Mat)
  • Fu, Kun
  • Scholes, Louise
  • Tang, Fangcheng

Abstract

Crowdfunding provides many opportunities for the development of society by supporting entrepreneurial and innovative activities. This article concerns equity crowdfunding syndicates; innovative entrepreneurial financing that introduces professional lead investors to online platforms. Equity crowdfunding syndicates facilitate crowdfunding by mitigating the information asymmetry between crowd investors and entrepreneurs. Based on a multidimensional view of trustworthiness, we investigate the effects of lead investors' integrity, ability, and benevolence on their funding performance. Focusing our analysis on data from a sample of 179 lead investors on AngelList, a world-leading equity crowdfunding platform in the U.S., we find that lead investors’ integrity and ability are, as predicted, positively associated with their funding performance. However, we do not find a significant effect from benevolence. The results also show that the investment-specific human capital of lead investors moderates the effect of integrity on their funding performance. Our study contributes to the crowdfunding literature by providing insights into the multidimensional trustworthiness of a capital provider in determining funding performance. It also contributes to the under-researched area of technological innovation since a crowdfunding syndicate is an alternative means of financing for entrepreneurs.

Suggested Citation

  • Zhang, Ye & Hughes, Mathew (Mat) & Fu, Kun & Scholes, Louise & Tang, Fangcheng, 2023. "The effect of lead investors’ trustworthiness on funding performance: The moderating effect of investment-specific human capital," Technology in Society, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:teinso:v:73:y:2023:i:c:s0160791x23000271
    DOI: 10.1016/j.techsoc.2023.102222
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