Fintech and home bias: The power of new social capital in innovative entrepreneurial financing

Abstract

We identify that technology crowdfunding campaigns attracting more domestic investors have a higher probability of project success and examine the role of home bias in supporting online innovative entrepreneurial financing. The extent of the home bias effect among technology entrepreneurs varies and is notably linked to their social capital. When a technology entrepreneur has high “old” social capital, the home bias is strengthened and aligned with a preference-based interpretation. In contrast, technology entrepreneurs' excessive capabilities of creating “new” social capital help mitigate the home bias, reduce the dependence on local investors, and promote more diversified investment decisions, which supports an information-based interpretation. Evidence also reveals that technology entrepreneurs’ home country levels of financial inclusion and investor protection influence the link between home bias and crowdfunding outcomes, indicating that the economic benefits generated in fintech are heterogeneous across different countries.