Crowdfunding – a regional policy assessment

The entrepreneurial finance literature argues that investors prefer to invest in close proximity to investee firms to facilitate better information exchange, due diligence and investment decisions, and post-investment monitoring. However, crowdfunding has different geographies than e.g. venture capital. Actors are of-ten anonymous, as on stock markets, and geographical proximity seems irrele-vant. Contrary, research indicates that also on-line platform-investors prefer close proximity in investments. However, previous research studies large mar-kets such as the U.S., Australia, U.K., Italy, possibly affecting the extent to which there is an investment ‘home bias’. The first of two interrelated research questions in this paper asks whether, and to which extent, there are geograph-ical effects on direct financing mechanisms like crowdfunding. Affirmative an-swers to this question provide a rationale to embark on a regional policy dis-cussion.

New modes of financing and new actors argueably smoothens the financial sys-tem and could potentially alleviate some of the regional financing gap, which is said to hinder development of regional innovation and entrepreneurial ventures. Following this reasoning, bottom-up driven, private crowdfunding initiatives should be given room for unfolding opportunities for groups at the financial markets (nacent entrepreneurs) who are potentially otherwise marginalised and rationed. Contrary, it could be argued that a more extensive regulation of crowdfunding, as pursued at other parts of financial markets, is expedient and that crowdfunding de-couples finance and competences, contrary to what has been strived for in recent capital market policies. Therefore, the second re-search question is: which problem areas can be identified in crowdfunding, and how should the upsurge of crowdfunding be perceived from a regional innova-tion policy perspective?