In this paper, we analyze patterns of transaction between individuals using data drawn from Kiva.org, a global online crowdfunding platform that facilitates prosocial, peer-to-peer lending. Our analysis, which employs an aggregate dataset of country-to-country lending volumes based on more than three million individual lending transactions that took place between 2005 and 2010, considers the dual roles of geographic distance and cultural differences on lenders’ decisions about which borrowers to support. While cultural differences have seen extensive study in the Information Systems literature as sources of friction in extended interactions, here, we argue and demonstrate their role in individuals’ selection of a transaction partner. We present evid ence that lenders do prefer culturally similar and geographically proximate borrowers. An analysis of the marginal effects indicates that an increase of one standard deviation in the cultural differences between lender and borrower countries is associated with 30 fewer lending actions, while an increase of one standard deviation in physical distance is associated with 0.23 fewer lending actions. We also identify a substitution effect between cultural differences and physical distance, such that a 50 percent increase in physical distance is associated with an approximate 30 percent decline in the effect of cultural differences. Considering approaches to overcoming the observed cultural effect, we offer some empirical evidence of the potential of IT-based trust mechanisms, focusing on Kiva’s reputation rating system for microfinance intermediaries. We discuss the implications of our findings for prosocial lending, online crowdfunding, and electronic markets more broadly.
Crowd-funded markets have recently emerged as a novel source of capital for entrepreneurs. As the economic potential of these markets is now being realized, they are beginning to go mainstream, a trend reflected by the explicit attention crowdfunding has received in the American Jobs Act as a potential avenue for economic growth, as well as the recent focus that regulators such as the U.S. Securities and Exchange Commission have placed upon it. Although the formulation of regulation and policy surrounding crowd-funded markets is becoming increasingly important, the behavior of crowdfunders, an important aspect that must be considered in this formulation effort, is not yet well understood. A key factor that can influence the behavior of crowd funders is information on prior contribution behavior, including the amount and timing of others' contributions, which is published for general consumption. With that in mind, in this study, we empirically examine social influence in a crowd-funded marketplace for online journalism projects, employing a unique data set that incorporates contribution events and Web traffic statistics for approximately 100 story pitches. This data set allows us to examine both the antecedents and consequences of the contribution process. First, noting that digital journalism is a form of public good, we evaluate the applicability of two competing classes of economic models that explain private contribution toward public goods in the presence of social information: substitution models and reinforcement models. We also propose a new measure that captures both the amount and the timing of others' contribution behavior: contribution frequency (dollars per unit time). We find evidence in support of a substitution model, which suggests a partial crowding-out effect, where contributors may experience a decrease in their marginal utility from making a contribution as it becomes less important to the recipient. Further, we find that the duration of funding and, more importantly, the degree of exposure that a pitch receives over the course of the funding process, are positively associated with readership upon the story's publication. This appears to validate the widely held belief that a key benefit of the crowdfunding model is the potential it offers for awareness and attention-building around causes and ventures. This last aspect is a major contribution of the study, as it demonstrates a clear linkage between marketing effort and the success of crowd-funded projects.
In this study, we examine how consumers respond to firms' use of two types of information for personalization: product preferences and name. We collect a unique data set of over 10 million e-mail advertisements sent by a website to over 600,000 customers who could buy the advertised products from the online merchant. We estimate a two-stage hierarchical model using Bayesian analysis to account for observable and unobservable consumer heterogeneity. Our analysis suggests several interesting results regarding consumers' responses to firms' use of information. When firms use product-based personalization (where the use of information is not explicitly mentioned), consumers respond positively. On the other hand, consumers respond negatively when firms are explicit in their use of personally identifiable information (i.e., a personalized greeting). We also find that negative responses to personalized greetings are moderated by consumers' familiarity with firms. The main contribution of this study is that it not only indicates the economic benefits of personalization in e-mails but also highlights consumers' concerns over the use of information in personalization.
This research examines the role of diversification on incumbent firms' response to the threat of new entry. When faced with threats posed by new technologies, incumbent firms in the information technology (IT) industry can either perform research and development (R&D), or acquire the new entrants who are successful at innovating. We use a two-stage game-theoretic framework to model the relation between diversification and the decision to acquire versus perform R&D. We also collect data on financial indicators for firms in the IT industry using the Compustat database to empirically test the propositions from the analytical model. Our results suggest that firms with a higher degree of diversification are more likely to innovate through acquisition than through R&D. Moreover, diversification has a positive effect on investment in acquisitions, as well as a negative effect on investment in R&D.
The article presents the results of a study which examined the use of blogs in a corporate context, focusing on the social aspects of such information systems. The role of network externalities, positive feedback, and the demographic variables of age and gender were analyzed. The results of the study indicated that network effects were stronger for younger users and women, and strongest for relational networks. The effect of age was nonlinear. Positive feedback and use of blogs by managers correlated with increased blogging.
The Internet was a major factor in the 2008 U.S. presidential campaign and has become an important tool for political communication and persuasion. Yet, information systems research is generally silent on the role of the Internet in politics. In this paper, we argue that IS is positioned to enhance understanding of the influence of the Internet on politics, and, more specifically, the process of election campaigning using Internet-based technologies such as Web 2.0. In this paper, we discuss how these technologies can change the nature of competition in politics and replace or complement traditional media. Our empirical study on how Web 2.0 technologies were used by the candidates leading up to the 2008 U.S. presidential primaries sheds light on how these technologies influenced candidate performance. Finally, we outline a research agenda highlighting where IS can contribute to the academic discourse on e-politics.
We use a game-theoretic model to examine how information personalization by firms interacts with different dimensions of product differentiation (namely, horizontal and vertical differentiation). We consider the possibility that consumers attach different importance to various types of product differentiation, and report the equilibrium in terms of the "quality--fit" ratio, which measures the relative strength of preference for quality compared to preference for product fit and is a function of the cost of quality and the cost of product misfit. We also consider how different market structures (whether firms are similar or differentiated on the horizontal dimension ex ante) lead to different equilibriums when firms adopt personalization. We show that personalization by one firm leads to higher profits for both firms if product quality and misfit costs are high and the firms offer similar products ex ante. On the other hand, if firms offer differentiated products, personalization is profitable only if the effectiveness of the personalization technology is high or if both product quality and misfit costs are low. We also highlight conditions under which investments in personalization and product quality can be complements or substitutes to each other. Finally, we show that a firm can respond to a competitor's personalization by either increasing (aggressive response) or decreasing (defensive response) investments in its own quality. Our results provide insights to managers on when to invest in personalization technologies and how to adjust their investments in product quality after the firm (or its competitor) adopts personalization.