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Soft and hard information in equity crowdfunding: network effects in the digitalization of entrepreneurial finance.

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Authors: Estrin, Saul1 (AUTHOR), Khavul, Susanna1,2 (AUTHOR) susanna.khavul@sjsu.edu, Wright, Mike3 (AUTHOR)
Source: Small Business Economics. Apr2022, Vol. 58 Issue 4, p1761-1781. 21p. 3 Charts, 1 Graph.
Subject Terms: *Equity crowd funding, *Transaction costs, *Crowd funding, *Externalities, *Information networks, Digital technology
Abstract: As a digital financial innovation, equity crowdfunding (ECF) allows investors to exploit the complementarity of information provision and network effects in a reduced transaction cost environment. We build on the underlying distinction between soft and hard information and show that ECF platforms create an environment of greater information pooling that benefits from network externalities. We test our hypotheses using a unique proprietary dataset and find that soft information has a greater impact than hard on the likelihood that a financing pitch will be successful. Moreover, the effects of soft information are amplified by the size of the investor network on the platform and network size also positively moderates the effect of information on the amount invested during each pitch. We conclude that ECF platforms can successfully exploit low transaction costs of the digital environment and bring network externalities to bear on investor decisions. Taken together that these increase the supply of funds to entrepreneurs. [ABSTRACT FROM AUTHOR]
Database: Entrepreneurial Studies Source
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PubType: Academic Journal
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  Data: <searchLink fieldCode="AR" term="%22Estrin%2C+Saul%22">Estrin, Saul</searchLink><relatesTo>1</relatesTo> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22Khavul%2C+Susanna%22">Khavul, Susanna</searchLink><relatesTo>1,2</relatesTo> (AUTHOR)<i> susanna.khavul@sjsu.edu</i><br /><searchLink fieldCode="AR" term="%22Wright%2C+Mike%22">Wright, Mike</searchLink><relatesTo>3</relatesTo> (AUTHOR)
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  Data: <searchLink fieldCode="JN" term="%22Small+Business+Economics%22">Small Business Economics</searchLink>. Apr2022, Vol. 58 Issue 4, p1761-1781. 21p. 3 Charts, 1 Graph.
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  Data: *<searchLink fieldCode="DE" term="%22Equity+crowd+funding%22">Equity crowd funding</searchLink><br />*<searchLink fieldCode="DE" term="%22Transaction+costs%22">Transaction costs</searchLink><br />*<searchLink fieldCode="DE" term="%22Crowd+funding%22">Crowd funding</searchLink><br />*<searchLink fieldCode="DE" term="%22Externalities%22">Externalities</searchLink><br />*<searchLink fieldCode="DE" term="%22Information+networks%22">Information networks</searchLink><br /><searchLink fieldCode="DE" term="%22Digital+technology%22">Digital technology</searchLink>
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  Data: As a digital financial innovation, equity crowdfunding (ECF) allows investors to exploit the complementarity of information provision and network effects in a reduced transaction cost environment. We build on the underlying distinction between soft and hard information and show that ECF platforms create an environment of greater information pooling that benefits from network externalities. We test our hypotheses using a unique proprietary dataset and find that soft information has a greater impact than hard on the likelihood that a financing pitch will be successful. Moreover, the effects of soft information are amplified by the size of the investor network on the platform and network size also positively moderates the effect of information on the amount invested during each pitch. We conclude that ECF platforms can successfully exploit low transaction costs of the digital environment and bring network externalities to bear on investor decisions. Taken together that these increase the supply of funds to entrepreneurs. [ABSTRACT FROM AUTHOR]
PLink https://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=ent&AN=158059967
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      – Type: doi
        Value: 10.1007/s11187-021-00473-w
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      – Code: eng
        Text: English
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        PageCount: 21
        StartPage: 1761
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      – SubjectFull: Equity crowd funding
        Type: general
      – SubjectFull: Transaction costs
        Type: general
      – SubjectFull: Crowd funding
        Type: general
      – SubjectFull: Externalities
        Type: general
      – SubjectFull: Information networks
        Type: general
      – SubjectFull: Digital technology
        Type: general
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      – TitleFull: Soft and hard information in equity crowdfunding: network effects in the digitalization of entrepreneurial finance.
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            NameFull: Estrin, Saul
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            NameFull: Khavul, Susanna
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              Text: Apr2022
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              Y: 2022
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