Financing micro-entrepreneurship in online crowdfunding markets: What drives local bias?

Jian Ni, Yi Xin and Fangzhu Yang

Journal of Economic Behavior & Organization, 2025, vol. 238, issue C

Abstract: This paper investigates local bias in online crowdfunding and examines the channels through which it manifests. Using rich data from a major Chinese reward-based crowdfunding platform, we document strong local bias among funders, particularly for projects whose evaluation relies on local knowledge. We develop and estimate a structural model to quantify the roles of preference and information channels in driving this bias, finding that informational frictions account for roughly two-thirds of the effect. A counterfactual policy that removes project location information increases contributions from different-province funders and benefits projects originating in underdeveloped regions. Our findings highlight the role of platform design in shaping investor behavior and expanding funding access for micro-entrepreneurs.

Keywords: Crowdfunding; Micro-entrepreneurship; Local bias; Information frictions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:238:y:2025:i:c:s0167268125003208

DOI: 10.1016/j.jebo.2025.107201

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