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Network vs Market Relations: The Effect of Friends in Crowdfunding by Emőke-Ágnes Horvát; Jayaram Uparna; Brian Uzzi is a scholarly article available to read on EtoBox.

What is Network vs Market Relations: The Effect of Friends in Crowdfunding about?

Crowds offer a new form of efficacious collective decision making, yet knowledge about the mechanisms by which they achieve superior outcomes remains nascent. It has been suggested that crowds work best with market-like relationships when individuals make independent decisions and possess dissimilar information. By contrast, sociological discussions of markets argue that risky decisions are mitigated by network relations that embed economic transactions in social ties that promote trustworthiness and reciprocity. To investigate the role of networks within crowds and their performance effects, we examined the complete record of financial lending decisions on Prosper.com, 1/2006-3/2012, the first U.S. crowdfunding platform and a chief gateway to capital for entrepreneurs and general borrowers that continues to disrupt conventional financial lending structures infusing more than $5.1 billion into the market in 2013. Our study reveals how reciprocity, recurring borrower-lender dyads, and persistent co-lending underpin the dynamics of network lending. Further, we show how network ties influence the evolution of the lending behavior. We find that in the early stage of fundraising, networ

Author

Emőke-Ágnes Horvát; Jayaram Uparna; Brian Uzzi

Publisher

ACM

Published

2015

Language

EN