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Do social networks shape the geography of crowdfunding?

Sylvain Dejean ()

Working Papers from HAL

Abstract: Does the distance still matters in a context where digital technologies promised to eliminate distance-related costs? In crowdfunding platforms, the founder of a project and the backers mainly exchange tacit information (trustworthiness and seriousness of the founder, feasibility of a project), challenging the ability of the Internet to abolish the cost of distance. We investigate how the existence of social ties between two geographical areas, by lowering the asymmetry of information, can shape the flow of funding in a given country. We take advantage of a unique database provided by the French leader of reward-based Crowdfunding. With a dataset containing 12887 projects and 452 850 contributions representing a value of 19 million euros over the period 2012/2015, we estimate, for each pair of the 94 French regions, the number and the amount of bilateral funding as well as their determinants in a gravity-like equation model. To account for the existence of social ties between French regions we exploit information of the French national Census of 2013 about regional migration. Our mains results are first that the elasticity of distance is still important (around 0.5) in the context of reward-based crowdfunding platforms. We then show that taking into account the existence of social ties between regions strongly reduces and even annihilates (under some specifications) the impact of distance. This result suggests that if digital technology could have reduced the geographical distance, only social proximity seems able to decrease the information-related costs.

Keywords: Crowdfunding; economic geography; gravity; social networks (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-geo, nep-pay, nep-ppm, nep-soc and nep-ure
Date: 2017-11-22
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01645147
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