The effect of social bonding and identity on the decision to invest in food production

Consumer interest in locally produced food is a growing trend. Like the preference for local in food consumption decisions, an individual may be motivated to support the local community by participating with investment capital. This paper draws on the phenomenon of home bias in financial decisions and hypothesizes that familiarity with agricultural production generates a positive attitude towards investing in the domestic food chain. Using a dispersed sample of 845 financial market professionals, we find that locational effects and social proximity contribute to self-categorized rural identity and bonding. Individuals who identify themselves as rural are more positively disposed to investing in firms that operate in the food chain. Consumption preference for domestically produced food and preference for maintaining the vitality of rural areas increase the probability of perceiving food production as attractive investment. The evidence reconciles with the familiarity and patriotism hypotheses. The findings are relevant for agricultural producer firms that seek outside equity and may prove useful for effective marketing of financial products.