Hearing from afar: geographical distance and word-of-mouth in crowdfunding

Purpose – Word-of-Mouth (WOM) and home bias are known to affect the financing performance of crowdfunding campaigns. This study combines the concept of geographically influenced information transmission chains into the existing framework. This study examines these factors, with a focus on the interaction of the geographical distance and WOM on crowdfunding performance. Design/methodology/approach – A corpus of 61,703 project details and 4,580,155 comments were collected from the Kickstarter platform using a web crawler written in Python. The physical distance between creator and backer acts as a proxy for geographical distance. WOM polarity is determined by the sentiment of the comments. Econometric models were formed to estimate the moderating effect, using two financing metrics: a binary indicator of funding success and the pledged goal. Findings – The results inform that WOM through comment sentiment and geographical distance sentiment positively impact crowdfunding financing performance. Project backers situated closer to the creator tend to be more critical, generating more negative comments. However, geographical distance compensates for the negative WOM. Originality/value – This study extends the signal theory by considering geographical distance in two dimensions: the signal transmission chain and information processing cost. The campaign success factor of geographical distance on the negative WOM and the non-home bias of backers who are geographically closer to the project creators, provide useful pitching references for the creators and reward-based crowdfunding platforms.