Abstract
Information asymmetry between backers and project creators impedes the crowdfunding success. Consequently, creators usually rely on various information to alleviate information asymmetry. Particularly, the location information of both backers and creators embodies their geographic and cultural distance, which may affect crowdfunding project attractiveness. Whereas current literature almost ignores the role cultural distance in crowdfunding, this research focuses on the reward-based crowdfunding, so that it becomes salient to form the appreciation and judgment of the innovative, creative, or artistic nature of projects. Meanwhile, geographic distance is examined to join the debates between flat world hypothesis and home bias proposition. A series of econometric models are examined based on a sample of 264 fundraising projects collected from Kitckstarter.com through Python program. Results show that cultural distance exerts a U-shape effect, which initially impedes the crowdfunding performance but promote projects when large enough. Geographic distance generally exerts insignificant impact on crowdfunding performance. Furthermore, cultural and geographic distance exerts the asymmetric effects on experienced versus new backers. This article underscores the important implications of cultural distance on reward-based crowdfunding. By showing the differential effects of cultural and geographic distance on experience versus new backers, it empirically infers the social capital as the underlying mechanism.
Highlights
Crowdfunding refers to the efforts by entrepreneurial individuals and groups using the Internet to fund their cultural, social, and for-profit ventures by drawing on relatively small contributions from a relatively large number of individuals, without standard financial intermediaries [1]
We investigate the role of geographic distance, aiming to resolve the inconsistent findings between the two schools. ird, by demonstrating the asymmetric effects of cultural and geographic distance on experiential and new backers, we empirically infer the social capital, in which the backers develop inside the crowdfunding community, as the plausible underlying mechanism. is differs but complements what Colombo et al [31] postulated that the internal social capital project creators acquire in the crowdfunding platform helps attract contributions
Culture and art creative projects are based on their own cultural attributes, with a certain story and sentimentality, which attract the attention of backers. erefore, a project that sounds attractive or creative will break through geographical distance and have a group of enthusiastic supporters worldwide. erefore, we propose the hypothesis as follows: H2: geographic distance exerts an insignificant impact on crowdfunding performance. ere will be no significant difference between large geographic distance and small geographic distance in crowdfunding project attractiveness
Summary
Crowdfunding refers to the efforts by entrepreneurial individuals and groups using the Internet to fund their cultural, social, and for-profit ventures by drawing on relatively small contributions from a relatively large number of individuals, without standard financial intermediaries [1]. Not all crowdfunding projects can attract the desired amount of funding [3]. Information asymmetry in crowdfunding is pervasive, so that potential backers lack substantive knowledge on both the capabilities or trustworthiness and the characteristics of the proposed initiations [4,5,6]. Current literature has documented various signals that crowdfunding creators can adopt to alleviate the information asymmetry and attract potential backers. Some other researchers focus on the implicit information during the dynamic fundraising cycle, such as herding information among backers [5], creator-backer interaction [18], and information implied by contributing patterns of previous backers [16, 19, 20]
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