| Abstract |
We identify the crucial role social networks play in crowdfunding markets. Investors are 50% more likely to fund projects that their social network peers support and are 11.2% more likely to fund projects from regions to which they have strong social ties, given a one standard deviation change in the variables. Peer effects complement platform design choices and the effect of social ties, and social ties transmit information about economic conditions in project locations. Further, the investor-level effects aggregate and affect project funding successes. Our findings suggest that social networks increase investor awareness, disseminate information, and have real impacts on capital allocations. |