This study examines the assumptions of geographic proximity germane to the entrepreneur-investor dyad in the context of crowdfunded microfinance. Research has suggested that entrepreneurs and investors form geographic clusters due to monitoring costs and investor involvement in management (Chen et al., 2010). In crowdfunded microfinance, monitoring is often conducted by third parties and, thus, investors’ monitoring costs are low and uniform. Therefore, it is unlikely that the traditional geographic proximity relationships hold. We investigate the role of distance in funding outcomes for high-poverty entrepreneurs seeking crowdfunding. Cognitive distance suggests that geographic distance can have a positive effect on organizational outcomes due to the creation of novelty. Thus, we hypothesize that increasing geographic distance between investors and entrepreneurs will be positively related to funding outcomes for high-poverty entrepreneurs. Because microlending is a value driven phenomena we propose value orientation alignment as a means of selection.
Anglin, Aaron H.; Allison, Thomas H.; Plummer, Lawrence A.; and Busenitz, Lowell W.
"DISTINCTLY DISTANT: GEOGRAPHIC AND COGNITIVE DISTANCE IN CROWDFUNDED MICROLENDING (INTERACTIVE PAPER),"
Frontiers of Entrepreneurship Research: Vol. 34
, Article 8.
Available at: http://digitalknowledge.babson.edu/fer/vol34/iss18/8