The Geography of Crowdfunding
AbstractPerhaps the most striking feature of "crowdfunding" is the broad geographic dispersion of investors in small, early-stage projects. This contrasts with existing theories that predict entrepreneurs and investors will be co-located due to distance-sensitive costs. We examine a crowdfunding setting that connects artist-entrepreneurs with investors over the internet for financing musical projects. The average distance between artists and investors is about 3,000 miles, suggesting a reduced role for spatial proximity. Still, distance does play a role. Within a single round of financing, local investors invest relatively early, and they appear less responsive to decisions by other investors. We show this geography effect is driven by investors who likely have a personal connection with the artist-entrepreneur ("family and friends"). Although the online platform seems to eliminate most distance-related economic frictions such as monitoring progress, providing input, and gathering information, it does not eliminate social-related frictions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16820.
Date of creation: Feb 2011
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Erik Brynjolfsson & Yu (Jeffrey) Hu & Mohammad S. Rahman, 2009. "Battle of the Retail Channels: How Product Selection and Geography Drive Cross-Channel Competition," Management Science, INFORMS, vol. 55(11), pages 1755-1765, November.
- Juanjuan Zhang & Peng Liu, 2012. "Rational Herding in Microloan Markets," Management Science, INFORMS, vol. 58(5), pages 892-912, May.
- Ramana Nanda & Tarun Khanna, 2007.
"Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry,"
Harvard Business School Working Papers
08-003, Harvard Business School, revised Feb 2009.
- Ramana Nanda & Tarun Khanna, 2010. "Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(4), pages 991-1012, December.
- Horrace, William C. & Oaxaca, Ronald L., 2006. "Results on the bias and inconsistency of ordinary least squares for the linear probability model," Economics Letters, Elsevier, vol. 90(3), pages 321-327, March.
- Ali Hortaçsu & F. Asís Martínez-Jerez & Jason Douglas, 2009. "The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 53-74, February.
- Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521728355, April.
- Austin Nichols, 2003. "VINCENTY: Stata module to calculate distances on the Earth's surface," Statistical Software Components S456815, Boston College Department of Economics, revised 16 Feb 2007.
- Walter Powell & Kenneth Koput & James Bowie & Laurel Smith-Doerr, 2002. "The Spatial Clustering of Science and Capital: Accounting for Biotech Firm-Venture Capital Relationships," Regional Studies, Taylor & Francis Journals, vol. 36(3), pages 291-305.
- Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March.
- Blum, Bernardo S. & Goldfarb, Avi, 2006. "Does the internet defy the law of gravity?," Journal of International Economics, Elsevier, vol. 70(2), pages 384-405, December.
- Rubinton, Brian J, 2011. "Crowdfunding: disintermediated investment banking," MPRA Paper 31649, University Library of Munich, Germany.
- Parker, Simon C., 2014. "Crowdfunding, Cascades and Informed Investors," IZA Discussion Papers 7994, Institute for the Study of Labor (IZA).
- Chris Forman & Avi Goldfarb & Shane Greenstein, 2014.
"Information Technology and the Distribution of Inventive Activity,"
in: The Changing Frontier: Rethinking Science and Innovation Policy
National Bureau of Economic Research, Inc.
- Chris Forman & Avi Goldfarb & Shane Greenstein, 2014. "Information Technology and the Distribution of Inventive Activity," NBER Working Papers 20036, National Bureau of Economic Research, Inc.
- Wojciech Hardy, 2013. "How to perfectly discriminate in a crowd? A theoretical model of crowdfunding," Working Papers 2013-16, Faculty of Economic Sciences, University of Warsaw.
- Seth Freedman & Ginger Zhe Jin, 2014. "The Signaling Value of Online Social Networks: Lessons from Peer-to-Peer Lending," NBER Working Papers 19820, National Bureau of Economic Research, Inc.
- Ghani, Ejaz & Kerr, William R. & Stanton, Christopher, 2013.
"Diasporas and outsourcing : evidence from oDesk and India,"
Policy Research Working Paper Series
6403, The World Bank.
- Ejaz Ghani & William R. Kerr & Christopher T. Stanton, 2012. "Diasporas and Outsourcing: Evidence from oDesk and India," NBER Working Papers 18474, National Bureau of Economic Research, Inc.
- BELLEFLAMME, Paul & LAMBERT, Thomas & SCHWIENBACHER, Armin, 2011. "Crowdfunding: tapping the right crowd," CORE Discussion Papers 2011032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ajay Agrawal & Christian Catalini & Avi Goldfarb, 2013.
"Some Simple Economics of Crowdfunding,"
in: Innovation Policy and the Economy, Volume 14, pages 63-97
National Bureau of Economic Research, Inc.
- Jonathan Meer & Oren Rigbi, 2012. "Transactions Costs and Social Distance in Philanthropy: Evidence from a Field Experiment," Working Papers 1205, Ben-Gurion University of the Negev, Department of Economics.
- Pitschner, Stefan & Pitschner-Finn, Sebastian, 2014. "Non-profit differentials in crowd-based financing: Evidence from 50,000 campaigns," Economics Letters, Elsevier, vol. 123(3), pages 391-394.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.