Regional social capital and moral hazard in crowdfunding

Tse-Chun Lin and Vesa Pursiainen

Journal of Business Venturing, 2022, vol. 37, issue 4

Abstract: We contribute to institutional and social capital theory by developing a theoretical framework that suggests that informal and formal institutions are important in mitigating moral hazard in reward-based crowdfunding. We analyze a large sample of Kickstarter campaigns to test these predictions. We find a strong positive relationship between entrepreneurs' home-county social capital and their crowdfunding performance. A rule change that strengthens entrepreneurs' obligation to provide backers with the promised rewards is associated with a reduction in the effect of social capital, suggesting that formal institutions can substitute for informal ones and provides causal evidence of the effect of social capital.

Keywords: Crowdfunding; Social capital; Formal and informal institutions; Kickstarter; Moral hazard (search for similar items in EconPapers)
JEL-codes: D22 D81 G02 G23 L26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:37:y:2022:i:4:s0883902622000362

DOI: 10.1016/j.jbusvent.2022.106224

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