Birds of a Feather Flock Together: The Inclusive Effect of Similarity Patterns in Equity Crowdfunding

Valeria Venturelli,Alessia Pedrazzoli,Giovanni Gallo

doi:10.3390/su12093539

Abstract

Crowdfunding is helping to drive financial inclusion by expanding the availability of funds to traditionally excluded and underserved groups of individuals, such as ethnic minority and female entrepreneurs. This study verifies how ethnic and gender similarity between investor and entrepreneur can affect the invested amount in an equity crowdfunding campaign. Using an integrated approach with linear regression and Shapley decomposition, we analyze 8600 investments made by 5996 unique personal shareholder investors in 81 equity crowdfunding campaigns. Results show that similarity patterns seem to significantly influence the amount invested in a campaign but their effects change according to investor’s gender and ethnic origin. In fact, even if female investors give a higher amount to men-led companies, their preference changes if the company is run by a female founder belonging to the same ethnic minority group. Results emphasize equity crowdfunding’s potential as a tool for the financial inclusion of ethnic minority groups of investors and entrepreneurs.

Highlights

Crowdfunding industry is revolutionizing the financial services market, by allowing to obtain financial resources required for developing new products and technological innovations competing with traditional entrepreneurial finance players [1]
This study verifies whether and how the ethnic and gender similarity among founder and investor affects the invested amount in an equity crowdfunding campaign, allowing for a better understanding of the role played by equity crowdfunding as a transformative tool for supporting the financial inclusion of female and ethnic minority entrepreneurs and investors, filling a gap still existing in the empirical literature [6]
When the interaction between similarity variables is included, Mod. 2 shows that ethnic similarity has a positive and significant role on the amount invested in a campaign only if a coexistence with a gender similarity is in place

Summary

Introduction

Crowdfunding industry is revolutionizing the financial services market, by allowing to obtain financial resources required for developing new products and technological innovations competing with traditional entrepreneurial finance players [1]. Most prior scholarly research has concentrated on ascertaining investors’ motivations for participating in crowdfunding campaigns [13,14,15] or on detecting biases that affect investment decisions [16] Among the latter, several studies have pinpointed the presence of gender similarity effect for which female investors support female entrepreneurs, that especially in the financing market have difficulty gaining access to external capital for the creation of new ventures [2,17,18]

Objectives

Results

Conclusion