EconPapers    
Economics at your fingertips  
 

Thank you for being a friend: The roles of strong and weak social network ties in attracting backers to crowdfunded campaigns

Joshua Foster

Information Economics and Policy, 2019, vol. 49, issue C

Abstract: This paper uses daily panel data to study the effects that entrepreneurs’ social networks have on the success of their projects seeking capital from a potentially large group of individual investors (i.e. crowdfunding). Much of the literature to date demonstrates both theoretically and empirically that the benefit of large social networks accrues at the beginning of the crowdfunding campaign and are commonly the initial contributions that the project receives. We find this is consistent with unsuccessful campaigns, however, among successful campaigns many of the benefits of large online social networks occur only after the project has met its funding goal. In particular, we find that entrepreneurs with relatively large online social networks receive a statistically significantly larger number of backers only after the project is successfully funded. It is hypothesized this result is due to the composition of strong and weak ties in the entrepreneur’s social network. Importantly, when a project reaches its funding goal a positive signal of its quality is sent to those in the entrepreneur’s social network and motivates the relatively large group of weak ties in it to contribute. As a result, it puts into question the value that strong ties can have in aiding entrepreneurs in reaching their funding goal.

Keywords: Crowdfunding; New ventures; Entrepreneurial finance; Startups (search for similar items in EconPapers)
JEL-codes: D85 D92 G23 L26 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167624519300083
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:49:y:2019:i:c:s0167624519300083

DOI: 10.1016/j.infoecopol.2019.100832

Access Statistics for this article

Information Economics and Policy is currently edited by D. Waterman

More articles in Information Economics and Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2020-02-19
Handle: RePEc:eee:iepoli:v:49:y:2019:i:c:s0167624519300083