<p>Financing Micro-entrepreneurship in Online <span>Crowdfunding Markets: What Drives Local Bias?</span></p>

This paper investigates local bias in online crowdfunding and examines the channels through which it manifests. Using rich data from a major Chinese reward-based crowdfunding platform, we document strong local bias among funders, particularly for projects whose evaluation relies on local knowledge. We develop and estimate a structural model to quantify the roles of preference and information channels in driving this bias, finding that informational frictions account for roughly two-thirds of the effect. A counterfactual policy that removes project location information increases contributions from different-province funders and benefits projects originating in underdeveloped regions. Our findings highlight the role of platform design in shaping investor behavior and expanding funding access for micro-entrepreneurs.

Keywords: Crowdfunding, micro-entrepreneurship, local biases, information frictions

JEL Classification: L26, M13, D83

Suggested Citation: Suggested Citation

Ni, Jian and Xin, Yi and Yang, Fangzhu,

Financing Micro-entrepreneurship in Online Crowdfunding Markets: What Drives Local Bias?

(April 1, 2020). Available at SSRN: https://ssrn.com/abstract=3580585 or http://dx.doi.org/10.2139/ssrn.3580585