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The Effect of Lead Investors’ Trustworthiness on Funding Performance: The Moderating Effect of Investment-specific Human Capital

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posted on 2024-01-24, 16:26 authored by Ye Zhang, Mathew Hughes, Kun Fu, Louise Scholes, Fangcheng Tang

Crowdfunding provides many opportunities for the development of society by supporting entrepreneurial and innovative activities. This article concerns equity crowdfunding syndicates; innovative entrepreneurial financing that introduces professional lead investors to online platforms. Equity crowdfunding syndicates facilitate crowdfunding by mitigating the information asymmetry between crowd investors and entrepreneurs. Based on a multidimensional view of trustworthiness, we investigate the effects of lead investors’ integrity, ability, and benevolence on their funding performance. Focusing our analysis on data from a sample of 179 lead investors on AngelList, a world-leading equity crowdfunding platform in the U.S., we find that lead investors’ integrity and ability are, as predicted, positively associated with their funding performance. However, we do not find a significant effect from benevolence. The results also show that the investment-specific human capital of lead investors moderates the effect of integrity on their funding performance. Our study contributes to the crowdfunding literature by providing insights into the multidimensional trustworthiness of a capital provider in determining funding performance. It also contributes to the under-researched area of technological innovation since a crowdfunding syndicate is an alternative means of financing for entrepreneurs.

Funding

National Social Science Fund of China (grant number 22BGL054)

History

Author affiliation

School of Business, University of Leicester

Version

  • VoR (Version of Record)

Published in

Technology in Society

Volume

73

Publisher

Elsevier

issn

0160-791X

Copyright date

2023

Available date

2024-01-24

Language

en

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