Social Networks in Online Peer-to-Peer Lending: The Case of Event-Type Ties as Pipes and Prisms

Abstract

A considerable amount of academic research on crowdfunding has highlighted the importance of online social networks to crowdfunding success. Despite findings from these early studies, the focus of the extant literature has been on more persistent state-type ties such as friendship. In the current research, we examine how borrower-partner and borrower-team event-type ties affect lender behavior and loan success in online peer-to-peer (P2P) lending. Our empirical results using a multilevel mixed effects model reveal that borrower-team networks function as pipes that facilitate the flow of information and prospective lenders while borrower-partner ties function as prisms that signal borrowers’ pressing financial need. Our results highlight the importance of establishing lending teams on crowdfunding platforms to enhance lender contribution.