Bigger from a distance: The moderating role of spatial distance on the importance of traditional and rhetorical quality signals for transactions in crowdfunding

Abstract

This article investigates the moderating effect of geographic distance on the importance of traditional and rhetorical quality signals (i.e., language-based signals communicated through the narrative) for the success of crowdfunding campaigns over the Internet. We argue that the information gap between backers and innovators rises with the increases in the geographic distance between them, even for transactions that occur over the Internet. Drawing on signaling theory, we argue that since distant backers face higher levels of information asymmetry compared to nearby backers, the value of traditional and rhetorical quality signals are amplified for them. Interestingly, we show that the interaction of spatial distance and less costly rhetorical signals, such as positive psychological capital, is the same as the interaction of spatial distance and traditional costly signals such as past success experience and endorsement. An analysis of 114,276 Kickstarter crowdfunding campaigns, launched during 2009–2018 in more than 150 countries, confirms our propositions regarding the interaction of geographic distance and quality signals. Our results remain consistent in multiple robustness tests.