Paper Number

1751

Paper Type

Short Paper

Abstract

The higher information asymmetry in crowdfunding underscores the significance of trust compared to traditional financing methods. Trust in the high-asymmetry crowdfunding environment relies on cues, which can lead to biased judgments by fund-providers. This study addresses the scarcity of research on bias in crowdfunding by examining how fund-providers, relying on entrepreneurial cues, develop trust. The study defines and introduces the concept of a stereotype tax in entrepreneurial funding, suggesting that minority entrepreneurs face additional expectations to secure trust and funding. Drawing on social categorization theory, the study explores the interaction of uncontrollable cues (race and gender) and controllable cues (expertise, enactment, passion, novelty, and usefulness). Data were collected from MTurk using an experimental survey. This study attempts to create awareness regarding hidden challenges in the form of a 'hidden' stereotype tax for women and black entrepreneurs in the US in securing trust and funding from fund-providers.

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Jun 14th, 12:00 AM

STEREOTYPE TAX: THE UNEQUAL TERRAIN OF CROWDFUNDING FOR WOMEN AND BLACK ENTREPRENEURS

The higher information asymmetry in crowdfunding underscores the significance of trust compared to traditional financing methods. Trust in the high-asymmetry crowdfunding environment relies on cues, which can lead to biased judgments by fund-providers. This study addresses the scarcity of research on bias in crowdfunding by examining how fund-providers, relying on entrepreneurial cues, develop trust. The study defines and introduces the concept of a stereotype tax in entrepreneurial funding, suggesting that minority entrepreneurs face additional expectations to secure trust and funding. Drawing on social categorization theory, the study explores the interaction of uncontrollable cues (race and gender) and controllable cues (expertise, enactment, passion, novelty, and usefulness). Data were collected from MTurk using an experimental survey. This study attempts to create awareness regarding hidden challenges in the form of a 'hidden' stereotype tax for women and black entrepreneurs in the US in securing trust and funding from fund-providers.

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