Borrower Learning Effects: Do Prior Experiences Promote Continuous Successes in Peer-to-Peer Lending?

There are a large amount of studies on the impact of individual experience on learning outcome, which ignore the conditioning and implicitly assume that the learning behaviors are bound to arise. This study develops a two-stage conceptual model for the interpretation of individual learning, and aims to explore how individual’s prior experience affects the initiating of subsequent learning behavior first and then impacts the success of subsequent learning behavior. Using a large sample of loan application data over a five-year period from a Chinese P2P lending platform Renrendai, we found strong evidence that both prior successes and prior failures can motivate borrowers to take subsequent borrowing behaviors again. However, in regard to the impact of individual experience on learning outcome, our finding in online environment is contrary to the prevalent view in organizational learning—“we learn more effectively in failure than in success”. Specifically, we found only successes can lead to desirable success whereas failures can’t, which indicates that borrowers with failure experience are willing to repeat borrowing but unable to learn from their failures. Further, we find a beneficial interaction effect between borrower’s prior successes and prior failures on subsequent borrowing success. These results are robust across a variety of settings. Our study enriches the understanding of individual learning by focusing not only on outcome improvement but also on conditioning. Moreover, we investigate learning process in an online environment which is anonymous and lack of peer communication that offline organizations have, we draw some different findings. Our findings also offer practical insights for borrowers under financial difficulties and platform managers to correctly interpret prior experience and enhance the probability of subsequent funding success in P2P lending.