TheNearer,theBetter?TheImpactofCulturalandGeographic

Research ArticleThe Nearer the Better The Impact of Cultural and GeographicDistance on Crowdfunding Project Attractiveness

Hui Fan 1 Teng Gao 23 and Shuman Liu 4

1School of Economics and Management Tongji University Shanghai China2School of Tourism and Exhibition Hefei University Hefei China3Chaohu Research Center for Culture Economic and Social Development Hefei China4Faculty of Business Lingnan University Hong Kong China

Correspondence should be addressed to Teng Gao gaoteng1963163com

Received 21 July 2021 Accepted 4 September 2021 Published 26 September 2021

Academic Editor Wen-Tsao Pan

Copyright copy 2021Hui Fan et al-is is an open access article distributed under the Creative Commons Attribution License whichpermits unrestricted use distribution and reproduction in any medium provided the original work is properly cited

Information asymmetry between backers and project creators impedes the crowdfunding success Consequently creators usuallyrely on various information to alleviate information asymmetry Particularly the location information of both backers andcreators embodies their geographic and cultural distance which may affect crowdfunding project attractiveness Whereas currentliterature almost ignores the role cultural distance in crowdfunding this research focuses on the reward-based crowdfunding sothat it becomes salient to form the appreciation and judgment of the innovative creative or artistic nature of projects Meanwhilegeographic distance is examined to join the debates between flat world hypothesis and home bias proposition A series ofeconometric models are examined based on a sample of 264 fundraising projects collected from Kitckstartercom through Pythonprogram Results show that cultural distance exerts a U-shape effect which initially impedes the crowdfunding performance butpromote projects when large enough Geographic distance generally exerts insignificant impact on crowdfunding performanceFurthermore cultural and geographic distance exerts the asymmetric effects on experienced versus new backers -is articleunderscores the important implications of cultural distance on reward-based crowdfunding By showing the differential effects ofcultural and geographic distance on experience versus new backers it empirically infers the social capital as theunderlying mechanism

1 Introduction

Crowdfunding refers to the efforts by entrepreneurial in-dividuals and groups using the Internet to fund their cul-tural social and for-profit ventures by drawing on relativelysmall contributions from a relatively large number of in-dividuals without standard financial intermediaries [1]Online crowdfunding platforms have become appealingchannels for fundraising and markets for crowdfundinghave rapidly and significantly grown into a multibillion-dollar industry worldwide [2] Although seemingly prom-ising not all crowdfunding projects can attract the desiredamount of funding [3] Information asymmetry in crowd-funding is pervasive so that potential backers lack sub-stantive knowledge on both the capabilities ortrustworthiness and the characteristics of the proposedinitiations [4ndash6]

Accordingly current literature has documented varioussignals that crowdfunding creators can adopt to alleviate theinformation asymmetry and finally attract potential backersSome work on the project quality signals embodied in theproject descriptions [1 6ndash11] creator-trustworthiness sig-nals [8 12ndash15] timing signals [16] foundersrsquo social capital[4] and product quality signals [14 17] Some other re-searchers focus on the implicit information during thedynamic fundraising cycle such as herding informationamong backers [5] creator-backer interaction [18] andinformation implied by contributing patterns of previousbackers [16 19 20]

-is study aims to add to the pertinent literature byunderstanding whether and how the geographic and culturaldistance between a creator and a backer influences theperformance of crowdfunding projects Geographic distanceis salient due to the fact that as the striking features

HindawiMathematical Problems in EngineeringVolume 2021 Article ID 5683525 12 pageshttpsdoiorg10115520215683525

crowdfunding platforms remove geographic limitations butgreat geographic distance always exists between the creatorand backers [19] In offline investment context home biasexists because geographic proximity reduces the cost asso-ciated with information acquisition transaction or moni-toring (rationaleconomic causes) and engenders trust andoveroptimism toward transaction partners or opportunities(behavioral causes) [19 21ndash23] -e ubiquity of the Internetpromotes a ldquoflat worldrdquo hypothesis [24] because the afore-mentioned ldquohome biasrdquo [21] seems to become irrelevant incrowdfunding Nevertheless subsequent research on geo-graphic distance reveals controversial findings advocatingeither a negative effect [21 25] or a positive effect [1 26]

-e cultural distance information contained in crowd-funding projects is also an important factor affecting thesuccess or failure of crowdfunding projects Burtch et al [25]underscored the cultural fraction caused by cultural distanceand revealed its detrimental effect on crowdfunding per-formance However every cloud has a silver lining Culturaldistance helps backers ldquogo out of the boxrdquo and providesopportunities for individuals to learn about disparate con-cepts and ideas from different cultures -is is similar towhat Lu et al [27] posit that intercultural social interactionstimulates cultural learning to acquire new information andunderstand about the assumptions beliefs customs normsvalues or language of another culture Mollick [1] providesimplicit evidence on a positive effect of geographic distanceon crowdfunding projects that reflect the underlying culturalproducts of particular geographic areas

To fully understand the effect of geographic and culturaldistance on crowdfunding project performance we chooseKickstartercom for the empirical investigations which is theleading reward-based crowdfunding platform in the UnitedStates and has provided more funding for artists than theNational Endowment for the Arts [28] Based on a sample of264 fundraising projects this article reveals the morecomplex effects of cultural and geographic distance thanthose identified in the previous research Cultural distancehas a U-shape relationship with crowdfunding project at-tractiveness It initially discourages backers from supportingcrowdfunding projects when relatively small however thelarger cultural distance makes the creative ideas more ap-pealing when large enough Surprisingly geographic dis-tance does not play a significant role in attracting backers tocontribute Moreover we empirically infer the social capitalacquired and accumulated from the platform community asone plausible mechanism Whereas the U-shape effect ofcultural distance only exists for experienced backers largegeographic distance encourages experienced backers butdiscourages new backers

-is article provides three-folded contributions First itunderstands more thoroughly the role of cultural distanceon crowdfunding performance which has been mostly ig-nored by the literature [25] Increasing cultural distanceinitially impedes the crowdfunding success and fundingwillingness which is consistent with what Burtch et al [25]advocate however when it enlarges to some extent itsimpact turns to be positive -e U-shape relationship be-tween the cultural distance and crowdfunding performance

we have identified are innovative to the crowdfunding lit-erature By highlighting the salience of cultural backgroundin evaluating creative ideas we contend that backers make acomplex tradeoff between the uncertainty and perceivedcreativity of projects

Second we show that the effects of geographic distancedo not seem to be straightforward -ough it does notsignificantly impact the crowdfunding success or backersrsquocontribution amount it implicitly influences the backercomposition It encourages experienced backers but dis-courages new backers to contribute Our findings speak tothe controversial literature on the effect of geographic dis-tance (ie the negative effect by Burtch et al [25] and Linand Viswanathan [21] or the positive effect by Kang et al[26] andMollick [1]) and support the ldquoflat worldrdquo hypothesis[24] instead of the ldquohome biasrdquo proposition [21]

-ird the difference between the experienced and naivebackers reveals that crowdfunding platforms can cultivatethe internal social capital in the community which enablesexperienced backers to make the tradeoff between the un-certainty and perceived creativity Also the insights on howcultural distance and geographic distance influence thebacker composition are innovative whereas currently lit-erature mostly focuses on the crowdfunding success [1 10]backersrsquo contribution decisions [17 20] or interest rate[8 12]

2 Literature Review and Hypotheses

Usually crowdfunding involves an open call on the Internet-based platform for financial resources in the form of do-nation exchange for future products or some other rewards[29] Various crowdfunding platforms (such as KickstarterKiva or SellaBand) reduce market frictions associated withgeographic distance [19] Remarkably people still confrontwith uncertainty and information asymmetry on thetrustworthiness of fundraisers [5] or project quality [11 30]-us crowdfunding creators utilize various signals to al-leviate information asymmetry and attract potential backers

21 Various Signals to Enhance Crowdfunding ProjectAttractiveness Current literature has investigated varioussignals that help reduce uncertainty and informationasymmetry in the crowdfunding market Researchers un-derscore the signaling value of informational and social cuesthat facilitate backers to judge the project quality or trust-worthiness of borrowers -e information in the projectdescription determines crowdfunding success ranging fromthe voluntary self-disclosure to the more subtle such asspelling errors or linguistic style of the text [1 6 9 10]Meanwhile backers attend to many cues to judge thecredibility of a borrowers such as his popularity in his socialnetwork as indicated by his friendship or online word-of-mouth [7 12] or simply his appearance attractiveness [8 13]Moreover crowdfunding success is vulnerable to socialinfluence thus the information implied by the contributingpatterns of previous backersrsquo shapes subsequent backersrsquodecisions [5 16 19 20]

2 Mathematical Problems in Engineering

-e broad geographic dispersion of backers supports aldquoflat worldrdquo hypothesis [24] Existing findings on the effect ofgeographic distance are far from conclusive Geographicproximity may limit backersrsquo potential to leverage socialnetworks For instance Mollick [1] and Kang et al [26]disclosed a positive effect of geographic distance in that largegeographic distance signals the widely recognized projectquality or reflects the underlying cultural products How-ever Lin and Viswanathan [21] and Burtch et al [25]demonstrated that backers still favor geographically proxi-mate projects supporting a ldquohome biasrdquo proposition

Among the four basic types of crowdfunding posited byMollick [1] the reward-based model fits well with creativecrowdfunding projects undertaken by artists musicians film-makers inventors and social enterprise First individualssupporting such projects receive a reward but not any financialincentives returns or repayment [7] Second the biggest dif-ference lies in information asymmetry and uncertainty [18] Inthe all-or-nothing game project creators set a funding goal andreceive the donations only if the goal is reached and only afterthe project is successfully funded and implemented the productdescribed in the creative crowdfunding project will exist [1] andcan enlarge information asymmetry between creators andbackers in the crowdfunding markets -ird people makejudgment and funding decisions based on their appreciation ofthe ldquoinnovativerdquo ldquocreativerdquo or ldquoartisticrdquo nature of the productsfor which the cultural background becomes salient -us weconsider whether and how cultural and geographic distanceinfluences crowdfunding project attractiveness aiming tocontribute to the existing literature as follows

First we underscore the role of cultural distance in thereward-based crowdfunding which has been largelyneglected currently -e cultural background of bothbackers and fundraisers become salient for the reward-basedcrowdfunding for creative or artistic projects Second weinvestigate the role of geographic distance aiming to resolvethe inconsistent findings between the two schools -ird bydemonstrating the asymmetric effects of cultural and geo-graphic distance on experiential and new backers we em-pirically infer the social capital in which the backers developinside the crowdfunding community as the plausible un-derlying mechanism -is differs but complements whatColombo et al [31] postulated that the internal social capitalproject creators acquire in the crowdfunding platform helpsattract contributions

Notably Burtch etal [25] also examined the dual roles ofgeographic and cultural distance and evidence that backersdo prefer culturally similar and geographically proximateproject creators We differ from it for at least two pointsFirst Burtch et al [25] investigated the aggregated effects ofgeographic and cultural distance at the national level byaggregating all crowdfunding by country We dig deeply atthe individual project level and map out their effects onindividual crowdfunding project attractiveness Secondwhile Burtch et al [25] proposed the IT-based trust toexplain the adverse effects of geographic and cultural dis-tance we empirically show the social capital as one plausibleexplanation by uncovering the their asymmetric effects onexperienced and new backers

22 CrowdfundingProjectAttractiveness When confrontingvarious crowdfunding projects on Kickstartcom potentialbackers usually aim to tap the most attractive one and decidethe contribution amount Although crowdfunding seems tobe a promising channel not all projects are able to attract thedesired amount of funding [3] -us whether a project issuccessfully funded measures the overall attractivenessMeanwhile the average fund indicates backersrsquo willingnessto contribute

23 e Effect of Cultural Distance on Crowdfunding ProjectAttractiveness -ere are strong forces within nations tocreate and maintain a shared culture [32] Cultural distancerefers to the extent to which the shared norms and values inone country differ from those in another and is oper-ationalized in terms of the six dimensions power distanceavoidance of uncertainty individualism vs collectivismmasculinity vs feminity long-term orientation vs short-term normative orientation and indulgence vs restraint[33] Online crowdfunding usually involves cross-borderbusiness transactions or interactions with different societalvalue systems [34] Furthermore because we particularlyfocus on the reward-based crowdfunding platforms forcreative or artistic ideas a backerrsquos motivation to help othersrealize their creative ideas instead of financial incentives isgenerally more significant [16] -e backer selects the mostappealing ideas based on the appreciation of the ldquoinnova-tiverdquo ldquocreativerdquo or ldquoartisticrdquo nature of the funded productsamong other project signals As a result the culturalbackgrounds of both the creator and backers become salientfor funding decisions (whether and how much to fund acreative idea) -is is quite consistent with what Chua et alrsquo[35] content that cultural distance is one of three culturalcharacteristics particularly relevant in understanding crea-tive ideas or solutions in a global context

Nevertheless cultural distance has received very limiteddiscussion in crowdfunding literature Exceptionally Burtchet al [25] demonstrated that cultural differences play asignificant impeding role in crowd fundersrsquo decision-mak-ing -e authors interpret this as an awareness effect sug-gesting that cultural differences are only relevant insofar asbackers are aware of them Although Mollick [1] focuses ongeographic distance the implications he suggests for itspositive effect on crowdfunding success propose that culturemay play a pivotal role especially for those projects thatreflect the underlying cultural components of particulargeographic areas -ese existing studies reveal either apositive or a negative effect a situation similar to interna-tional business research

On the one hand cultural familiarity theory holds thatfirms are less likely to invest in culturally distant countriesand that cultural difference hampers multinational enter-prisesrsquo performance when investing in culturally distantcountries (eg [36 37]) On the other hand some re-searchers provide evidence that cross-border acquisitions inculturally distant countries tend to be more valuable as morediversified cultural integration helps enhance post-acquisition performance [38] or that high cultural distance

Mathematical Problems in Engineering 3

has been associated with low rates of joint venture failure[39] In sum pertinent literature has identified a double-edged sword effect of cultural distance in cross-borderbusiness [40]

-is article proposes a nonlinear U-shape relationshipbetween cultural distance and crowdfunding project at-tractiveness which indicates that cultural distance exerts anegative effect on project attractiveness when it is relativelysmall or moderate and a positive effect when large enough-is contention is based on the notion that when decidingthe attractiveness of a project located in a culturally differentcountry backers make the tradeoff between the uncertaintyand perceived creativity When relatively small or moderatecultural distance produces frictions and poses difficulties tosome extent in understanding and interpreting the creativeideas in the crowdfunding projects Meanwhile the smallcultural distance between somewhat similar cultures en-genders low perceived creativity for a creative idea describedby a crowdfunding project that is backersrsquo evaluation of acreative idea tends to be constrained by the conventions androutines of their home culture Cultural proximity couldreduce lendersrsquo reach for wider and untapped potential [26]-us cultural distance exerts a detrimental effect on theproject attractiveness when it is low or moderate

However we postulate a positive effect of cultural dif-ference when it is large enough When people perceive anobject the distance increases the uncertainty and givespeople a broader space for imagination thus producing akind of beauty of distance A crowdfunding project needs togain sufficient attention and recognition to encourage thepublic to contribute [26] When evaluating an idea from astrikingly different culture backers face large comprehensivecomplexity and difficulties which is supposed to hamper itsattractiveness However being exposed to more culturallydiverse ideas can increase the creative content of the mind[41] motivate individuals to perform more adeptly in cre-ative insight tasks [42] and stimulate cultural learning toacquire new information and understand about the as-sumptions beliefs customs norms values or language ofanother culture [27] Global crowdfunding projects maycontain more novel information for backers [26] and receivemore support due to a high level of novelty [43] -us wepropose that cultural distance that is large enough exerts apositive effect on backersrsquo judgment of crowdfunding projectattractiveness

H1 cultural distance has a U-shape relationship withthe crowdfunding project attractiveness it exerts anegative impact when it is relatively low but a positiveimpact when large enough on the success of crowd-funding project (H1a) and on the average contributionamount of backers (H1b)

24 e Effect of Geographic Distance on CrowdfundingProject Attractiveness -e ldquoflat worldrdquo hypothesis thatcrowdfunding projects are usually supported by the broadgeographic dispersion of investors [24] gives rise to an in-teresting question ldquodo crowdfunding platforms reducemarket frictions associated with geographic distancerdquo

Several studies examine the effect of geographic distance onfunding decisions and reveal mixed findings -e home biasthat backers favor geographically approximate fundraisersexists for both the equity-based crowdfunding on Prospers[21] and reward-based crowdfunding on SellaBand [19]Contrarily Mollick [1] and Kang et al [26] disclosed apositive effect of geographic distance implying thatcrowdfunding not only relaxes geographic constraints butalso activates other mechanisms Mollick [1] demonstratesthis positive effect when crowdfunding projects reflect theunderlying cultural products of particular geographic areasMoreover Kang et al [26] contend that larger geographicdistance may enhance entrepreneursrsquo reach for wider anduntapped potential and their study reveals that furthergeographical distance led to higher funding In sum pre-vious studies have not concluded whether and how geo-graphic distance exerts a significant effect on crowdfundingsuccess performance

Since the Internet facilitates instant and inexpensivecommunication across large distances the impact of geo-graphical distance between project creators and backers oncrowdfunding projects has tended to fade in the context ofonline e-commerce and a globalized economy -eKickstarter platform has users all over the world and belongsto a group of investors interested in or relatively familiarwith the cultural and artistic creative industries Culture andart creative projects are based on their own cultural attri-butes with a certain story and sentimentality which easilyattract the attention of backers -erefore a project thatsounds attractive or creative will break through geographicaldistance and have a group of enthusiastic supportersworldwide -erefore we propose the hypothesis as follows

H2 geographic distance exerts an insignificant impacton crowdfunding performance -ere will be no sig-nificant difference between large geographic distanceand small geographic distance in crowdfunding projectattractiveness

25 Social Capital for Experienced (vs New) Backers Wefurther contend that the social capital the backers acquirefrom their community participation on the crowdfundingplatform may drive the complex effects of cultural andgeographic distance -e social capital refers to ldquothe sum ofthe actual and potential resources embedded withinavailable through and derived from the social contacts of anindividual or organizationrdquo [44] Crowdfunding platformsare not only intermediaries of monetary transactions butalso loci of social connections [31] Online communitymembers routinely help one another often going to greatlengths to volunteer and share their expertise and resourceswith other members even when there are no apparentbenefits from doing so [45ndash47] Consumers derive manybenefits from online community participation such aslearning problem-solving and the opportunity to socializeand ward off loneliness [48] Most of previous literatureinvestigated social capital from the perspective of the cre-ators and has found that creatorsrsquo social capital (ie acreatorrsquos social network ties obligations to fund other


creators and the shared meaning of the crowdfundingproject between the creator and the backers) had significanteffects on crowdfunding performance in both China and theUS [49] but has underscored the role of backersrsquo socialcapital [26 31] -e computer-mediated interactions occuramong creators and backers of projects [50] and entailbehaviors specific to crowdfunding communities [31]

By participating in the crowdfunding platform backerscan accumulate social capital in terms of information sourceand social support [51 52] -us experienced backers aremore able to make the complex tradeoff between the per-ceived uncertainty and creativity when evaluating the cre-ative ideas We empirically demonstrate this by theasymmetric effects of cultural and geographic distance onexperienced vs new backers Cultural distance has a U-shapeeffect in attracting more experienced backers (but not newbackers) to support the project -is is similar to research onthe multicultural experiencendashcreativity link that the morecontacts among two intercultural individuals the morelikely they assimilate and draw upon ideas from both cul-tures to synthesize novel and useful insights [53] Fur-thermore we speculate that when the cultural distance islarge enough backers will obviously perceive that the projectis different from the local culture of their own countryPeople with investment experience pursue novel psycho-logical feelings and have the need to explore new thingsEven if the cultural distance of the project is too large to leadto a certain degree of risk-taking cultural distance will not bethe reason to hinder their investment Instead the projectuncertainty and risk-taking brought by cultural distancemay become the attraction of their investment -ereforewe propose the hypothesis as follows

H3a cultural distance has a U-shape effect in attractingthe experienced backers it exerts a negative impact onthe number of the experienced backers when relativelysmall but a positive impact when large enough

New backers lack enough social capital and are less ableto make connections between disparate ideas originatingfrom different cultures Furthermore they are less likely toinspire creative thinking or break away from structured androutine ways of approaching problems In order to adapt tocultural differences new backers need to pay more physicaland mental costs Because many investors will encounterculture shock when facing strange stimulus people are easyto lose the basic ability to understand problems and evendistinguish things and choose to escape and return-erefore we propose the hypothesis as follows

H3b cultural distance has no significant effect inattracting the new backers

-e entry barrier for launching projects on crowd-funding platforms is very low so most new backers are notcompetent to compare and optimize choices in so manyprojects -is challenge can enlarge information asym-metry between creators and backers in the crowdfundingmarkets [18] Also new backers lack the informationresource or social support from the acquired social capitalon the online platform so they cannot accurately evaluate

the potential benefits and risks of competing crowd-funding projects [11] -erefore preference for geo-graphically proximate projects seems to be reasonable fornaive backers -erefore we postulate that geographicdistance exerts differential effects on experienced vs newbackers

H3c whereas large geographic distance discourages thenew backers from contributing it encourages the ex-perienced backers

3 Methodology

31 Sample Kickstarter is the largest reward-basedcrowdfunding provider worldwide [28] and data from theplatform have been used in several prior studies (eg[1 6 10 14 31]) Kickstarter is appropriate for this studybecause first the ldquocreativerdquo or ldquoartisticrdquo nature of creativeideas described by Kickstarter projects makes differentcultural backgrounds salient in appreciation and judg-ment Second Kickstarter presents all project informationsuch as resident city nationality funding and fundraisinghistory the funds raised thus far number of backers whohave contributed and the frequency distribution of thebackers Till August 17th 2021 its several million com-munity members have pledged $6033885042 to fund206813 creative ideas Among 20068256 total backers3379 backers have backed two or more projects

-is study uses Python to collect the real data generatedby creators and backers from kickstartercom Specificallythis study grabs the key fields of project which ended in 2017and get the data of 264 fundraising projects among which175 succeeded and 89 failed

32 DataDescriptions We summarize in Table 1 the projectcharacteristics for the whole sample and the successful andunsuccessful subsamples respectively -e average fund-raising cycle is 34 days and those successful ones tend tohave shorter cycles (32 vs 37 days) On average the projectsreceive funds ($18977) much more than they request($14895) -ose successful projects tend to receive morecontributions ($26477) than the requested amount($11027) while those unsuccessful ones usually set highertargets ($22501) but receive much fewer contributions($4485)

For each project the ldquocommunityrdquo section demonstratesthe backersrsquo composition including the frequency distri-bution of backer origins and the number of new and ex-perienced backers respectively -e summary of culturaldistance geographic distance and percentage of experiencedbackers are given in Table 1 -e projects can appeal to theexperienced backers a bit more (59) -e focal variable weare interested in is the cultural distance between the creatorand backers Following Cho and Kim [54] we gauge thecultural distance between the creator and the top 10countries (along with the number of backers from each ofthe 10 countries) based upon the six-dimension nationalculture model by Hofstede [33] We aggregate the distancescores which is weighted by the frequency of each country


on six available dimensions (httpsgeert-hofstedecomcultural-surveyhtml) To measure the geographic distancebetween the creator and the top 10 cities we use the interfaceof Google Maps APIs to obtain the latitudes and longitudesfor each city We manually measure the straight-line geo-graphic distance for each pair of cities

Besides the cultural and geographic distance we includeseveral essential covariates -e project duration whichindicates the degree of project exposure offers for awarenessand attention-building and promote the project perfor-mance [20] -e fundraising target usually set up a sharedgroup goal among backers When group identification isrelatively weak (as in crowdfunding community withanonymous members) individuals decide to pursue theshared group goal if believed to be worthwhile -us boththe fundraising cycle and project target should play a role incrowdfunding decisions Additionally researchers have il-lustrated that the personal characteristics of creators lead todiscriminations in the crowdfunding market [12 55] -enumber of initiated projects and that of successfully fundedones of a particular creator usually indicate the sophisti-cation of creators in the market and thus can influence thecrowdfunding project attractiveness All the relevant vari-ables are defined in detail in Table 2

33 Empirical Models and Results To test the effect ofcultural and geographic distance on crowding project at-tractiveness we build a series of empirical models Al-though we propose a quadratic relationship between thecultural distance and project attractiveness we include thelinear relationship as the baseline models

331 Effect of Cultural and Geographic Distance onCrowdfunding Project Attractiveness As Kickstarter adoptsthe rule of ldquoAll-or-Nothingrdquo support backers can success-fully contribute to a project only when the requested amounthas been reached -us this article measures the crowd-funding project attractiveness by whether the project issuccessfully funded and average fund each backer invests-e regression models are shown in model1 and model2respectively Particularly as the dependent variable inmodel1 is a dummy to indicate when a project is successfullyfunded (ie 1) or not (ie 0) we adopt the probit regressionmodels Please note that we also examine the linear rela-tionship between the cultural and geographic distance andproject attractiveness as the baseline models in model1baselineand model2baseline

Prob(success) α10 + β11culture distance + β12culture distance2

+ β13log(geographic distance)

+ c11requested amount + c

12fundraising cycle + c

13historical projects

+ c14historical success

+ c15total backers + c

16naive backers + ε1 model11113872 1113873

Average fund α20 + β21culture distance + β22culture2




23historical projects + c

24historical success



(1)

As displayed in the first column of Table 3 the culturaldistance (minus132lowastlowast SE 0054) does not have a significantlinear effect on crowdfunding project success However theestimation results for the quadratic relationships shown inthe second column reveal that the cultural distance has asignificant U-shape relationship with the crowdfundingsuccess (minus1453lowastlowastlowast SE 0703 0012lowastlowast SE 0006) When

the cultural distance is relatively small the larger the averagecultural distance between the backers and the project cre-ator the less attractive the artistic crowdfunding project andthus the lower the success likelihood When the culturaldistance is large to some extent the more culturally distantprojects become more appealing and are more likely tosucceed Nevertheless the geographic distance does not

Table 1 Statistical summary of the sample

Total sample (264) Successful (175) Unsuccessful (89)Mean Min Max Mean Min Max Mean Min Max

Fundraising cycle (day) 34 7 379 32 7 61 37 10 379Target (USD) 14895 1 165000 11027 1 160000 22501 400 165000Funded amount (USD) 18977 0 506351 26477 67 506351 4485 0 50010 of experienced backers 059 0 1 059 0 1 057 005 1Cultural distance 5584 4213 698 5566 4213 6295 5624 5320 698Geographic distance (km) 2962 8 13082 2905 15 13082 3090 8 9637


exert any significant effect on the success probability ofcrowdfunding projects either in model1baseline (minus0022SE 0099) or in model1 (minus0029 SE 0100)

-e last two columns of Table 3 also reveal how thecultural and geographic distance influence the backersrsquodecisions of contribution amount Similarly although thecultural distance does not show a significant effect (minus7402SE 5777) on the average contributed amount in thebaseline model (model2baseline) it demonstrates a significantU-shape impact in the quadratic relationship (minus240606lowastlowastlowastSE 67149 2078lowastlowastlowast SE 0596) When the cultural dis-tance between the backers and project creator is moderatethe backers may perceive the project to be less creative andless attractive due to the somewhat similar cultures and thus

be more reluctant to contribute-erefore the attractivenessof artistic crowdfunding project is negatively related to thecultural distance -e result was in accord with Kang et alrsquo[26] contention and support H1a However when thecultural distance is large enough backers are exposed to theinformation which is brand new or strikingly different fromthe conventions and routines of their home culture Ac-cordingly they may consider the crowdfunding project to beeye catching and innovative and pay more attention to theproject rendering them to contribute considerable funds-erefore H1b is support Again the geographic distancedoes not exert any significant effect on the average amount abacker is willing to contribute either in model2baseline (4367SE 10018) or in model2 (6836 SE 9817)

Table 2 Definitions of the variables

Variables Type and unit DefinitionDependent variablesSuccess or failure Dummy coded 1 if a project succeeds and 0 otherwise

Average fund Ratio variableUSD

-e average amount per backer contributes for a particular project calculated by thetotal amount a project raises divided by the number of total backers

-e number ofexperienced backers Counting variable -e number of experienced backers funding a particular project

-e number of newbackersa Counting variable -e number of new backers funding a particular project

Independent variables

Cultural distance Ratio variable -e average cultural distance between the creator and the funding backers based on thesix-dimension culture model

Geographic distance Ratio variablekilometer

-e average geographic distance between the creator and the funding backers based onthe Google Maps APIs

Covariates-e number of totalbackers Counting variable -e number of total backers funding a particular project

Requested amount Ratio variableUSD -e specified amount a creator requests for the initiated project

Fundraising cycle Ratio variable day -e specified days for fundraisingHistorical projects Counting variable -e number of projects a creator previous initiatedHistorical success Counting variable -e number of successful projects previously initiated by a creator

a-e number of total backers and the number of naıve backers included as control variables in the regressions on project attractiveness

Table 3 -e effects of cultural and geographic distance on crowdfunding project attractiveness

Model1baseline Model1 Model2baseline Model2

DV success or failure DV the average fund per backer

Cultural distance minus0131lowastlowast (0054) minus1446lowast (0813) minus7397 (5781) minus241640lowastlowastlowast (67189)Cultural distance2 mdash 00113lowastlowast (0562) mdash 2087lowastlowastlowast (0596)Log (geographic distance) minus0023 (0099) minus0030 (0099) 3871 (10043) 6326 (9839)Requested amount minus393e(minus5)lowastlowastlowast (710e(minus6)) minus433e(minus5)lowastlowastlowast (825e(minus6)) 0004lowastlowastlowast (00005) 0004lowastlowastlowast (00005)Fundraising cycle minus0006 (0005) minus0006 (0005) minus0001 (0512) minus0219 (0500)Historical projects 0185lowast (0086) 0176lowastlowast (0086) minus0322 (3045) minus0219 (2975)Historical success 0011 (0009) 0011 (0009) minus0150 (0325) minus0109 (0318)Total backers 0004lowastlowast (0002) 0005lowastlowast (0002) minus0085lowast (0044) minus0077lowast (0043)New backers 0033lowastlowastlowast (0008) 0032lowastlowastlowast (0008) 0047 (0113) minus0030 (0111)Constant 7356 (3271) 45606 (29291) 459033 (340880) 7002579lowastlowastlowast (1899579)

Probgt chi2 0000Pseudo R2 0385

Probgt chi2 0000Pseudo R2 0390 Adjusted R2 0170 Adjusted R2 02067

lowastlowastlowastSignificant at 001 lowastlowastSignificant at 005 lowastSignificant at 010


332 Effect of Cultural and Geographic Distance on Expe-rienced vs New Backers We postulate that the social capitalthe backers acquire from their community participation ofcrowdfunding platform is one of the plausible mechanismsthat may explain the effects of cultural distance We em-pirically disclose this potential by investigating the asym-metric effects of cultural distance on experienced vs newbackers Meanwhile we investigate whether geographicdistance shows any significant effect on experienced vs new

backers For comparison purpose we add the model for theirimpact on the total number of backers as well OnKickstarter each project discloses not only the frequencydistribution of backer origins but also the number of newbackers and that of experienced backers As the three de-pendent variables are counting variables the negative bi-nomial regression modes are employed in model3 model4and model5 (as well as their baseline models) as follows

The total number of backers α30 + β31culture distance + β32culture distance2








The number of experienced backers α40 + β41culture distance + β42culture distance2

+ β43log(geographic distance) + c41requested amount + c

42fundraising cycle

+ c43historical projects + c

44historical success + c

45total backers + c


The number of new backers α50 + β51culture distance + β52culture distance2








(2)

-e estimation results for model3 model4 and model5 aswell as their baseline models are given in Table 4 -ecultural distance does not exert a significant effect on thetotal number of backers either in the linear form inmodel3baseline (minus0063 SE 0042) or in the quadratic form inmodel3 (minus0465 SE 0563 minus464e(minus3) SE 495e(minus3))Surprisingly the geographic distance manifests a significantpositive effect in attracting more backers to contribute(0226 SE 0059) -is result is consistent with whatMollick [1] and Kang et al [26] advocate but contradictswith the negative effect identified by Lin and Viswanathan[21] and Burtch et al [25]

To empirically infer the social capital the backersacquire from community interactions as the underlyingmechanism the aforementioned effects of cultural dis-tance should be further qualified by their asymmetriceffects on the new and experienced backers As indicatedby the fifth and seventh columns the U-shape relationshipexists of the cultural distance only for the experiencedbackers (minus0991lowastlowastlowast SE 0341 009lowastlowastlowast SE 0003) butdoes not for the new backers (minus0065 SE 0379minus536e(minus4) SE 343e(minus3)) -e asymmetric impacts ofcultural distance on the experience vs new backers areintriguing It may imply that for it to play a significantrole in funding decisions culture distance should becomesalient Our findings disclose that only if backers acquiresocial capital from the platform interactions and becomeexperienced in evaluating the attractiveness of creativeideas they are more likely to be able to make the complex

tradeoff between the uncertainty and perceived creativityengendered by cultural distance

Interestingly geographic distance exerts a negative effectin attracting the naive backers (minus0323lowastlowastlowast SE 0054) but apositive effect in attracting experienced backers (0137lowastlowastlowastSE 0045) Large geographic distance discourages thebackers who seldom have contributing experience onKickstarter probably because the lack of a common set ofbeliefs and expression systems hampers the communicationand understanding between each other reducing the un-certainty of cooperation Also small distance indicates a lowcost of project knowledge search and acquisition but largedistance could increase the cost of cooperation and inno-vation through increased communication time and trafficdistance -erefore naive backers are more likely to con-tribute to the crowdfunding projects initiated by geo-graphically proximate creators

However for those experienced backers they have benefitedfrom online community participation and accumulated socialcapital from their previous contributions and they believe onlinecommunity members from different countries or areas wouldhelp each other -erefore trust and knowledge exchange ofexperienced backers are not constrained by geographic distancethey would not consider geographic distance convenience as themost important factor but focus on the benefit of social capitalbrought by far project rather than nearby projects Also ex-cessive proximity could reduce the learning range from eachother so they reduce innovation enthusiasm -us those ex-perienced backers are more attracted by the creative ideas


proposed by geographically distant creators -erefore thediscussions on the asymmetric effects of geographic distanceenrich the understanding of the effect of geographic distance inthe debating literature and empirically advocate the socialcapital as the plausible mechanism

4 Discussion and Conclusions

By using a sample of 264 crowdfunding projects on Kickstartercom this study investigates the impact of cultural and geo-graphic distance on crowdfunding performance and unveilsseveral exciting findings First cultural distance exerts aU-shapeeffect which initially impedes the crowdfunding performancebut promotes projects when large enough Specifically culturaldistance exerts a negative impact when it is relatively low but apositive impact when large enough on the success of crowd-funding project and the average contribution amount ofbackers Second this study reveals that geographic distanceexerts an insignificant impact on either project success or theaverage contribution amount -ird cultural and geographicdistance exerts the asymmetric effects on experienced versusnew backers Cultural distance has a U-shape effect in attractingexperienced backers but no effect in attracting new backers Butprojects with large geographic distance appeal to the experi-enced backers but discourage new backers from contributing

41 eoretical Contributions -is study differs from priorresearch along several vital dimensions First it is one of thescarce studies to understand the implications of culturaldistance on reward-based crowdfunding thoroughly Incrowdfunding transactions are mediated on platforms

which increase information asymmetry between backers andthe creators Backers evaluate the information provided bythe creators and contribute more if the creator delivers morevaluable signals that alleviate information asymmetry -eprimary literature focuses on the project quality signals [eg[7]] creator-trustworthiness signals [eg [8]] or social in-fluence during the dynamic fundraising cycle [eg [5]] butignores the role of cultural distance [25]

Different from the only two existing studies on culturaldistance [ie [1 25]] the U-shape relationship between thecultural distance and crowdfunding performance are original andcreative to the crowdfunding literature and backersrsquo complicatedtradeoff between uncertainty and perceived creativity drives theU-shape effect When evaluating a project from a similar culturebackers tend to reduce the imagination of potential pay moreattention to the ambiguity and thus feel not so attractive Whenevaluating a project embodying some characteristics of differentcultures backers tend to pay particular attention to the projectand inspire the creative content of themind-us their perceivedcreativity overcomes the uncertainty engendered

Second this study responds to previous disputes ongeographic distance effect and reveals the complex effects ofdistance on crowdfunding Rather than the ldquohome biasrdquoproposition [21] this study supports the ldquoflat worldrdquo hy-pothesis [24] and shows that geographic distance does notsignificantly affect project success or average contributionamount Noticeably geographic distance implicitly influencesthe backer composition by successfully encouraging experi-enced backersrsquo investment but discourages new backers

-ird our findings offer new avenues for research to-ward understanding how cultural and geographic distancedetermines our choices and actions -is study innovatively

Table 4 -e effect of cultural and geographic distance on backer composition

Model3baseline Model3 Model4baseline Model4 Model5baseline Model5

DV the total number of backers DV the number of experienced backers DV the number of new backers

Culturaldistance minus0062 (0042) minus0459 (0565) minus0048 (0041) minus0994lowastlowastlowast (0341) 0006 (0029) minus0063 (0381)

Culturaldistance2 mdash minus458e(minus3)

(497e(minus3)) mdash 0009lowastlowastlowast (0003) mdash minus514e(minus4)(345e(minus3))

Log(geographicdistance)

0235lowastlowastlowast (0059) 0227lowastlowastlowast (0059) 0147lowastlowastlowast (0046) 0140lowastlowastlowast(0045) minus0319lowastlowastlowast (0053) minus0321lowastlowastlowast (0054)

Requestedamount

276e(minus5)lowastlowastlowast(509e(minus6))


472e(minus6)lowast(257e(minus6))




Fundraisingcycle

minus297e(minus3)(479e(minus3))




314e(minus3)(326e(minus3))


Historicalprojects

866e(minus4)(150e(minus2)) 724e(minus4) (0015) 0052lowastlowast (0023) 0052lowastlowast (0023) minus0014 (0011) minus0014 (0011)

Historicalsuccess





minus410e(minus3)lowastlowastlowast(152e(minus3))


Total ofbackers mdash mdash 277e(minus3)lowastlowastlowast

(300e(minus4))274e(minus3)lowastlowastlowast(297e(minus4))



Constant 6430lowastlowastlowast (2512) minus8320 (16044) 5112lowastlowast (2328) minus2435lowastlowast (971) 4898lowastlowastlowast (1692) 3351 (10488)Probgt chi2 0000Pseudo R2 00291








and empirically infers the social capital as one plausiblemechanism for the effects of cultural and geographic dis-tance by showing the asymmetric effects on experiencedversus new backers while previous literature ignores howcultural distance and geographic distance influence thebacker composition -e social capital that experiencedbackers acquired and accumulated from the Internet-me-diated interactions [26 31] helps reduce the uncertainty ofthe project and synthesize novel and useful insights-erefore experienced backers are more able to formulatefunding decisions by balancing the uncertainty and per-ceived creativity Contrarily due to the lack of experience orsocial connections on the platform new backers may feeldifficult to communicate or assimilate essentially differentideas originating from different cultures Furthermore naıvebakers are less likely to get rid of rigid and fixed thinkingway Home bias exists in their decision-making processmaking them show a local preference

42 Practical Implications From a practical point of viewcreators can make use of the U-shape effect of culturaldistance to adjust the pledging and project characteristics toincrease the chance that a project is successfully fundedCreators should construct project descriptions of culturaldistance to meet the needs of experienced backers Based onthe profile data (eg funding experience background cul-tures or geographic areas in this study) creators may dis-close information (eg the number of Facebookconnections backers with similar interest) which help toinfluence the other signals sent in context of the projectcampaign Creators could present the high degree of culturaldistance by demonstrating the cultural diversity by photos orvideos -e relevant and detailed textual descriptions ormedia content of projects can signal preparedness and se-riousness to potential investors [56]

Second both crowdfunding platforms and project cre-ators should enhance Internet-mediated interactions tocultivate social capital for backers which help them over-come the fractions caused by cultural and geographic dis-tance Social capital investment is a long-term processtherefore creators may link the project to social mediaplatforms such as Facebook or LinkedIn and actively interactwith potential backers via two-way communication onKickstarter to interact with potential backers to promote theproject -e platform should encourage community par-ticipation supporting backers in sharing learning problem-solving and the opportunity to socialize Besides to attractexperienced investors creators may highlight the geo-graphical distance of the project and set the distance unit tometers instead of kilometers when displaying the projectdescription However to attract new backers creators mayweaken the geographical distance of the project when dis-playing the project such as reducing the number used toindicate the distance

-ird creators especially from start-up firms can use theInternet as a channel to promote their projects regardless ofgeographic distance Internet gives potential backers thechance to process relevant information for the investment

decision at a low cost while also providing an opportunity tochat with creators It is for this reason that creators shouldconsider crowdfunding as a resource to cost-effectivelybridge geographic boundaries and link investmentopportunities

43 Limitations and Future Research Directions -is studyunavoidably suffers from several limitations that open av-enues for further research First while the cultural back-ground of bakers and creators becomes salient for reward-based crowdfunding for artistic projects the main findingsneed caution when generalizing to other types of projects(eg fast-moving consumer goods and luxury goods) Sec-ond using data from reward-based crowdfunding raisesconcerns about the generalizability of our findings thusfuture research may collect data from multiple platforms-ird although we used econometric models to empiricallyinfer that the social capital experienced backers acquire fromtheir previous platform participation drives the asymmetriceffects of both cultural and geographic distance furtherresearch may replicate this study in a more controlledexperiment

Data Availability

-e data used to support the findings of this study areavailable from the corresponding author upon request

Conflicts of Interest

-e authors declare that there are no conflicts of interest

Acknowledgments

-is research was funded by Humanities and Social SciencesResearch Projects of Anhui Province (SK2019A0698) andTalent Research Projects of Hefei University (20RC74)

References

[1] E Mollick ldquo-e dynamics of crowdfunding an exploratorystudyrdquo Journal of Business Venturing vol 29 no 1 pp 1ndash162014

[2] T Hildebrand M Puri and J Rocholl ldquoAdverse incentives incrowdfundingrdquo Management Science vol 63 no 3pp 587ndash900 2016

[3] J Hollas ldquoIs crowdfunding now a threat to traditional fi-nancerdquo Corporate Finance Review vol 18 no 1 p 27 2013

[4] C Courtney S Dutta and Y Li ldquoResolving informationasymmetry signaling endorsement and crowdfunding suc-cessrdquo Entrepreneurship eory and Practice vol 41 no 2pp 265ndash290 2017

[5] J Zhang and P Liu ldquoRational herding in microloan marketsrdquoManagement Science vol 58 no 5 pp 892ndash912 2012

[6] N Steigenberger and H Wilhelm ldquoExtending signalingtheory to rhetorical signals evidence from crowdfundingrdquoOrganization Science vol 29 no 3 pp 529ndash546 2018

[7] S Bi Z Liu and K Usman ldquo-e influence of online in-formation on investing decisions of reward-based crowd-fundingrdquo Journal of Business Research vol 71 pp 10ndash182017


[8] R Iyer A I Khwaja E F P Luttmer and K Shue ldquoScreeningpeers softly inferring the quality of small borrowersrdquoManagement Science vol 62 no 6 pp 1554ndash1577 2016

[9] J Michels ldquoDo unverifiable disclosures matter evidence frompeer-to-peer lendingrdquo e Accounting Review vol 87 no 4pp 1385ndash1413 2012

[10] A Parhankangas and M Renko ldquoLinguistic style andcrowdfunding success among social and commercial entre-preneursrdquo Journal of Business Venturing vol 32 no 2pp 215ndash236 2017

[11] G K C Ahlers D Cumming C Gunther and D SchweizerldquoSignaling in equity crowdfundingrdquo Entrepreneurship eoryand Practice vol 39 no 4 pp 955ndash980 2015

[12] M Lin N R Prabhala and S Viswanathan ldquoJudging bor-rowers by the company they keep friendship networks andinformation asymmetry in online peer-to-peer lendingrdquoManagement Science vol 59 no 1 pp 17ndash35 2013

[13] J Duarte S Siegel and L Young ldquoTrust and credit the role ofappearance in peer-to-peer lendingrdquo Review of FinancialStudies vol 25 no 8 pp 2455ndash2484 2012

[14] T H Allison B C Davis J W Webb and J C ShortldquoPersuasion in crowdfunding an elaboration likelihoodmodel of crowdfunding performancerdquo Journal of BusinessVenturing vol 32 no 6 pp 707ndash725 2017

[15] J Cox T Nguyen A -orpe A Ishizaka S Chakhar andL Meech ldquoBeing seen to care the relationship between self-presentation and contributions to online pro-social crowd-funding campaignsrdquo Computers in Human Behavior vol 83pp 45ndash55 2018

[16] V Kuppuswamy and B L Bayus ldquoDoes my contribution toyour crowdfunding project matterrdquo Journal of BusinessVenturing vol 32 no 1 pp 72ndash89 2017

[17] B C Davis K M Hmieleski J W Webb and J E CoombsldquoFundersrsquo positive affective reactions to entrepreneursrsquocrowdfunding pitches the influence of perceived productcreativity and entrepreneurial passionrdquo Journal of BusinessVenturing vol 32 no 1 pp 90ndash106 2017

[18] N Wang Q Li H Liang T Ye and S Ge ldquoUnderstandingthe importance of interaction between creators and backers incrowdfunding successrdquo Electronic Commerce Research andApplications vol 27 pp 106ndash117 2018

[19] A Agrawal C Catalini and A Goldfarb ldquoCrowdfundinggeography social networks and the timing of investmentdecisionsrdquo Journal of Economics and Management Strategyvol 24 no 2 pp 253ndash274 2015

[20] G Burtch A Ghose and S Wattal ldquoAn empirical exami-nation of the antecedents and consequences of contributionpatterns in crowd-funded marketsrdquo Information SystemsResearch vol 24 no 3 pp 499ndash519 2013

[21] M Lin and S Viswanathan ldquoHome bias in online invest-ments an empirical study of an online crowdfundingmarketrdquoManagement Science vol 62 no 5 pp 1393ndash1414 2016

[22] S Lai and M Teo ldquoHome-biased analysts in emergingmarketsrdquo Journal of Financial and Quantitative Analysisvol 43 no 3 pp 685ndash716 2008

[23] N Strong and X Xu ldquoUnderstanding the equity home biasevidence from survey datardquo e Review of Economics andStatistics vol 85 no 2 pp 307ndash312 2003

[24] A Agrawal C Catalini and A Goldfarb ldquoFriends family andthe flat world the geography of crowdfundingrdquo NBERWorking Paper vol 16820 pp 1ndash61 2011

[25] G Burtch A Ghose A Ghose and S Wattal ldquoCulturaldifferences and geography as determinants of online prosociallendingrdquo MIS Quarterly vol 38 no 3 pp 773ndash794 2014

[26] L Kang Q Jiang and C-H Tan ldquoRemarkable advocates aninvestigation of geographic distance and social capital forcrowdfundingrdquo Information amp Management vol 54 no 3pp 336ndash348 2017

[27] J G Lu A C Hafenbrack P W Eastwick D J WangW W Maddux and A D Galinsky ldquoldquoGoing outrdquo of the boxclose intercultural friendships and romantic relationshipsspark creativity workplace innovation and entrepreneur-shiprdquo Journal of Applied Psychology vol 102 no 7pp 1091ndash1108 2017

[28] E Mollick and R Nanda ldquoWisdom or madness comparingcrowds with expert evaluation in funding the artsrdquo Man-agement Science vol 62 no 6 pp 1533ndash1553 2015

[29] P Belleflamme T Lambert and A SchwienbacherldquoCrowdfunding tapping the right crowdrdquo Journal of BusinessVenturing vol 29 no 5 pp 585ndash609 2014

[30] J-A Koch and M Siering ldquo-e recipe of successful crowd-funding campaignsrdquo Electronic Markets vol 29 no 4pp 661ndash679 2019

[31] M G Colombo C Franzoni and C RossindashLamastra ldquoIn-ternal social capital and the attraction of early contributions incrowdfundingrdquo Entrepreneurship eory and Practicevol 39 no 1 pp 75ndash100 2015

[32] G Hofstede G J Hofstede and M Minkov Cultures andOrganizations Software of the Mind McGraw-Hill NewYork NY USA 2010

[33] G Hofstede Culturersquos Consequences Comparing ValuesBehaviors Institutions and Organizations Across Nations SagePublications -ousand Oaks CA USA 2001

[34] L Tihanyi D A Griffith and C J Russell ldquo-e effect ofcultural distance on entry mode choice international diver-sification andMNE performance a meta-analysisrdquo Journal ofInternational Business Studies vol 36 no 3 pp 270ndash2832005

[35] R Y J Chua Y Roth and J-F Lemoine ldquo-e impact ofculture on creativityrdquo Administrative Science Quarterlyvol 60 no 2 pp 189ndash227 2015

[36] S-H Lee O Shenkar and J Li ldquoCultural distance investmentflow and control in cross-border cooperationrdquo StrategicManagement Journal vol 29 no 10 pp 1117ndash1125 2008

[37] Y Luo and M W Peng ldquoLearning to compete in a transitioneconomy experience environment and performancerdquoJournal of International Business Studies vol 30 no 2pp 269ndash295 1999

[38] P Morosini S Shane and H Singh ldquoNational cultural dis-tance and cross-border acquisition performancerdquo Journal ofInternational Business Studies vol 29 no 1 pp 137ndash1581998

[39] S H Park and G R Ungson ldquo-e effect of national cultureorganizational complementarity and economic motivationon joint venture dissolutionrdquo Academy of ManagementJournal vol 40 no 2 pp 279ndash307 1997

[40] T H Reus and B T Lamont ldquo-e double-edged sword ofcultural distance in international acquisitionsrdquo Journal ofInternational Business Studies vol 40 no 8 pp 1298ndash13162009

[41] W W Maddux and A D Galinsky ldquoCultural borders andmental barriers the relationship between living abroad andcreativityrdquo Journal of Personality and Social Psychologyvol 96 no 5 pp 1047ndash1061 2009

[42] C-Y Cheng and A K-Y Leung ldquoRevisiting the multiculturalexperience-creativity linkrdquo Social Psychological and Person-ality Science vol 4 no 4 pp 475ndash482 2013


[43] M Schulz P Haas K Schulthess I Blohm andJ M Leimeister ldquoHow idea creativity and hedonic valueinfluence project success in crowdfundingrdquo in Proceedings ofthe 12th International Conference On WirtschaftsinformatikOsnabruck Germany March 2015

[44] J Nahapiet and S Ghoshal ldquoSocial capital intellectual capitaland the organizational advantagerdquo Academy of ManagementReview vol 23 no 2 pp 242ndash266 1998

[45] M Ma and R Agarwal ldquo-rough a glass darkly informationtechnology design identity verification and knowledgecontribution in online communitiesrdquo Information SystemsResearch vol 18 no 1 pp 42ndash67 2007

[46] F Olivera P S Goodman and S S-L Tan ldquoContributionbehaviors in distributed environmentsrdquo MIS Quarterlyvol 32 no 1 pp 23ndash42 2008

[47] M M Wasko and S Faraj ldquoWhy should i share examiningsocial capital and knowledge contribution in electronic net-works of practicerdquo MIS Quarterly vol 29 no 1 pp 35ndash572005

[48] N Hara ldquoOnline communities of practice beyond orga-nizational boundariesrdquo Communities of Practice Informa-tion Science and Knowledge Management Springer BerlinGermany 2009

[49] H Zheng D Li J Wu and Y Xu ldquo-e role of multidi-mensional social capital in crowdfunding a comparativestudy in China and USrdquo Information amp Management vol 51no 4 pp 488ndash496 2014

[50] S Faraj and S L Johnson ldquoNetwork exchange patterns inonline communitiesrdquo Organization Science vol 22 no 6pp 1464ndash1480 2011

[51] P S Adler and S-W Kwon ldquoSocial capital prospects for anew conceptrdquo Academy of Management Review vol 27 no 1pp 17ndash40 2002

[52] C Mathwick C Wiertz and K De Ruyter ldquoSocial capitalproduction in a virtual P3 communityrdquo Journal of ConsumerResearch vol 34 no 6 pp 832ndash849 2008

[53] A K-Y Leung and C-Y Chiu ldquoMulticultural experienceidea receptiveness and creativityrdquo Journal of Cross-CulturalPsychology vol 41 no 5-6 pp 723ndash741 2010

[54] M Cho and G Kim ldquoA cross-cultural comparative analysis ofcrowdfunding projects in the United States and south KoreardquoComputers in Human Behavior vol 72 pp 312ndash320 2017

[55] D G Pope and J R Sydnor ldquoWhatrsquos in a picture evidence ofdiscrimination from prospercomrdquo Journal of Human Re-sources vol 46 no 1 pp 53ndash92 2011

[56] A Hoegen D M Steininger and D Veit ldquoHow do investorsdecide an interdisciplinary review of decision-making incrowdfundingrdquo Electronic Markets vol 28 no 3pp 339ndash365 2018


crowdfunding platforms remove geographic limitations butgreat geographic distance always exists between the creatorand backers [19] In offline investment context home biasexists because geographic proximity reduces the cost asso-ciated with information acquisition transaction or moni-toring (rationaleconomic causes) and engenders trust andoveroptimism toward transaction partners or opportunities(behavioral causes) [19 21ndash23] -e ubiquity of the Internetpromotes a ldquoflat worldrdquo hypothesis [24] because the afore-mentioned ldquohome biasrdquo [21] seems to become irrelevant incrowdfunding Nevertheless subsequent research on geo-graphic distance reveals controversial findings advocatingeither a negative effect [21 25] or a positive effect [1 26]

-e cultural distance information contained in crowd-funding projects is also an important factor affecting thesuccess or failure of crowdfunding projects Burtch et al [25]underscored the cultural fraction caused by cultural distanceand revealed its detrimental effect on crowdfunding per-formance However every cloud has a silver lining Culturaldistance helps backers ldquogo out of the boxrdquo and providesopportunities for individuals to learn about disparate con-cepts and ideas from different cultures -is is similar towhat Lu et al [27] posit that intercultural social interactionstimulates cultural learning to acquire new information andunderstand about the assumptions beliefs customs normsvalues or language of another culture Mollick [1] providesimplicit evidence on a positive effect of geographic distanceon crowdfunding projects that reflect the underlying culturalproducts of particular geographic areas

To fully understand the effect of geographic and culturaldistance on crowdfunding project performance we chooseKickstartercom for the empirical investigations which is theleading reward-based crowdfunding platform in the UnitedStates and has provided more funding for artists than theNational Endowment for the Arts [28] Based on a sample of264 fundraising projects this article reveals the morecomplex effects of cultural and geographic distance thanthose identified in the previous research Cultural distancehas a U-shape relationship with crowdfunding project at-tractiveness It initially discourages backers from supportingcrowdfunding projects when relatively small however thelarger cultural distance makes the creative ideas more ap-pealing when large enough Surprisingly geographic dis-tance does not play a significant role in attracting backers tocontribute Moreover we empirically infer the social capitalacquired and accumulated from the platform community asone plausible mechanism Whereas the U-shape effect ofcultural distance only exists for experienced backers largegeographic distance encourages experienced backers butdiscourages new backers

-is article provides three-folded contributions First itunderstands more thoroughly the role of cultural distanceon crowdfunding performance which has been mostly ig-nored by the literature [25] Increasing cultural distanceinitially impedes the crowdfunding success and fundingwillingness which is consistent with what Burtch et al [25]advocate however when it enlarges to some extent itsimpact turns to be positive -e U-shape relationship be-tween the cultural distance and crowdfunding performance

we have identified are innovative to the crowdfunding lit-erature By highlighting the salience of cultural backgroundin evaluating creative ideas we contend that backers make acomplex tradeoff between the uncertainty and perceivedcreativity of projects

Second we show that the effects of geographic distancedo not seem to be straightforward -ough it does notsignificantly impact the crowdfunding success or backersrsquocontribution amount it implicitly influences the backercomposition It encourages experienced backers but dis-courages new backers to contribute Our findings speak tothe controversial literature on the effect of geographic dis-tance (ie the negative effect by Burtch et al [25] and Linand Viswanathan [21] or the positive effect by Kang et al[26] andMollick [1]) and support the ldquoflat worldrdquo hypothesis[24] instead of the ldquohome biasrdquo proposition [21]

-ird the difference between the experienced and naivebackers reveals that crowdfunding platforms can cultivatethe internal social capital in the community which enablesexperienced backers to make the tradeoff between the un-certainty and perceived creativity Also the insights on howcultural distance and geographic distance influence thebacker composition are innovative whereas currently lit-erature mostly focuses on the crowdfunding success [1 10]backersrsquo contribution decisions [17 20] or interest rate[8 12]

2 Literature Review and Hypotheses

Usually crowdfunding involves an open call on the Internet-based platform for financial resources in the form of do-nation exchange for future products or some other rewards[29] Various crowdfunding platforms (such as KickstarterKiva or SellaBand) reduce market frictions associated withgeographic distance [19] Remarkably people still confrontwith uncertainty and information asymmetry on thetrustworthiness of fundraisers [5] or project quality [11 30]-us crowdfunding creators utilize various signals to al-leviate information asymmetry and attract potential backers

21 Various Signals to Enhance Crowdfunding ProjectAttractiveness Current literature has investigated varioussignals that help reduce uncertainty and informationasymmetry in the crowdfunding market Researchers un-derscore the signaling value of informational and social cuesthat facilitate backers to judge the project quality or trust-worthiness of borrowers -e information in the projectdescription determines crowdfunding success ranging fromthe voluntary self-disclosure to the more subtle such asspelling errors or linguistic style of the text [1 6 9 10]Meanwhile backers attend to many cues to judge thecredibility of a borrowers such as his popularity in his socialnetwork as indicated by his friendship or online word-of-mouth [7 12] or simply his appearance attractiveness [8 13]Moreover crowdfunding success is vulnerable to socialinfluence thus the information implied by the contributingpatterns of previous backersrsquo shapes subsequent backersrsquodecisions [5 16 19 20]





























3 Methodology


























(1)












































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References























































































3 Methodology


























(1)












































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References














































































3 Methodology


























(1)












































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References




































































3 Methodology


























(1)












































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References
















































































(1)












































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References

































































































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References








































































42fundraising cycle



45total backers + c










(2)























Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References












































































Requestedamount







Fundraisingcycle







Historicalprojects


Historicalsuccess

























Data Availability




Acknowledgments


References


































































Data Availability




Acknowledgments


References






























































































































Documents

TheNearer,theBetter?TheImpactofCulturalandGeographic