Abstract

http://ssrn.com/abstract=1692661
 
 

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The Geography of Crowdfunding


Ajay Agrawal


University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Christian Catalini


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Avi Goldfarb


University of Toronto - Rotman School of Management

October 29, 2010

NET Institute Working Paper No. 10-08

Abstract:     
Perhaps the most striking feature of "crowdfunding'' is the broad geographic dispersion of investors. This contrasts with existing theories that predict entrepreneurs and investors will be co-located due to distance-sensitive costs. We examine a crowdfunding setting that connects artist-entrepreneurs with investors over the internet for financing early stage musical projects. The average distance between artists and investors is about 3,000 miles, suggesting a reduced role for spatial proximity. Still, distance does play a role. Within a single round of financing, local investors invest relatively early, and they appear less responsive to decisions by other investors. We show this geography effect is driven by investors who likely have a personal connection with the artist-entrepreneur ("family and friends''). Although the online platform seems to eliminate most distance-related economic frictions such as monitoring progress, providing input, and gathering information, it does not eliminate social-related frictions.

Number of Pages in PDF File: 57

Keywords: Entrepreneurial finance, crowd-funding, internet, family and friends, local bias, social networks.

JEL Classification: R12, Z11, L17, G21, G24

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Date posted: October 20, 2010 ; Last revised: October 9, 2013

Suggested Citation

Agrawal, Ajay and Catalini, Christian and Goldfarb, Avi, The Geography of Crowdfunding (October 29, 2010). NET Institute Working Paper No. 10-08. Available at SSRN: http://ssrn.com/abstract=1692661 or http://dx.doi.org/10.2139/ssrn.1692661

Contact Information

Ajay Agrawal (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Christian Catalini
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
100 Main Street
E62-480
Cambridge, MA MA 02142
United States
HOME PAGE: http://https://mitsloan.mit.edu/faculty/detail.php?in_spseqno=58777
Avi Goldfarb
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)
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