Decisions under Uncertainty in Decentralized Online Markets: Empirical Studies of Peer-to-Peer Lending and Outsourcing

Recent developments in information technologies, especially Web 2.0 technologies, have radically transformed many markets through disintermediation and decentralization. Lower barriers of entry in these markets enable small firms and individuals to engage in transactions that were otherwise impossible. Yet, the issues of informational asymmetry that plague traditional markets still arise, only to be exacerbated by the "virtual" nature of these marketplaces. The three essays of my dissertation empirically examine how participants, many of whom are entrepreneurs, tackle the issue of asymmetric information to derive benefits from trade in two different contexts. In Essay 1, I investigate the role of online social networks in mitigating information asymmetry in an online peer-to-peer lending market, and find that the relational dimensions of these networks are especially effective for this purpose. In Essay 2, I exploit a natural experiment in the same marketplace to study the effect of shared geographical ties on investor decisions, and find that "home bias" is not only robust but also has an interesting interaction pattern with rational decision criteria. In Essay 3, I study how the emergence of new contract forms, enabled by new monitoring technologies, changes the effectiveness of traditional signals that affect a buyers' choice of sellers in online outsourcing. Using a matched-sample approach, I show that the effectiveness of online ratings and certifications differs under pay-for-time contracts versus pay-for-deliverable contracts. In all, the three essays of my dissertation present new empirical evidence of how agents leverage various network ties, signals and incentives to facilitate transactions in decentralized online markets, form transactional ties, and reap the benefits enabled by the transformative power of information technologies

Modelling Default Risk of Borrowers: Evidence from Online Peer to Peer Lending Platforms in Australia

Peer to Peer lending has the capacity to transforming the mass banking industry worldwide but credit risk modelling remains the core challenge of the platform. The general objective of this study is to analyse the credit default risk of borrowers of Peer to Peer online lending platform based in Australia. Specific objectives include the following; To identify the loan information applicants provide to request for a loan facility,Using RateSetter.com published data on loans to predict the likelihood of credit risk of the platform. In this article, we employed binary logistic regression model to assess the likelihood of loan default. Based on the mathematical approach and the nature of dependent variable, we grouped variables into categorical, numerical-continuous as well as binary. The dependent variable is dichotomous whilst real-life dataset was retrieved from a popular and competitive online lending platform based in Australia from 2014-2017. We identified that early repayment, no mortgage tenant; car, debt consolidation, investment, major events, professional services, 3-year loan duration, 4-year loan duration, interest rate and income have significant influence on borrowers’ likelihood to default. Our empirical coefficients suggest that, there is 83.4% likelihood of borrowers default rate and hence recommended a critical examination of borrowers’ information presented to the platform. This paper fulfills the need to examine the credit information provided by loan applicants. Similarly, it endeavors to predict the possibility of borrowers default risk and the reasons contributing to online lending credit default risk. Keywords: Credit Risk, Peer To Peer Online Lending, Binary Logistic Regression DOI: 10.7176/RJFA/10-2-0

Determinants of default in P2P lending

This paper studies P2P lending and the factors explaining loan default. This is an important issue because in P2P lending individual investors bear the credit risk, instead of financial institutions, which are experts in dealing with this risk. P2P lenders suffer a severe problem of information asymmetry, because they are at a disadvantage facing the borrower. For this reason, P2P lending sites provide potential lenders with information about borrowers and their loan purpose. They also assign a grade to each loan. The empirical study is based on loans'' data collected from Lending Club (N = 24, 449) from 2008 to 2014 that are first analyzed by using univariate means tests and survival analysis. Factors explaining default are loan purpose, annual income, current housing situation, credit history and indebtedness. Secondly, a logistic regression model is developed to predict defaults. The grade assigned by the P2P lending site is the most predictive factor of default, but the accuracy of the model is improved by adding other information, especially the borrower''s debt level

A Hybrid Simulation Framework of Consumer-to-Consumer Ecommerce Space

In the past decade, ecommerce transformed the business models of many organizations. Information Technology leveled the playing field for new participants, who were capable of causing disruptive changes in every industry. Web 2.0 or Social Web further redefined ways users enlist for services. It is now easy to be influenced to make choices of services based on recommendations of friends and popularity amongst peers. This research proposes a simulation framework to investigate how actions of stakeholders at this level of complexity affect system performance as well as the dynamics that exist between different models using concepts from the fields of operations engineering, engineering management, and multi-model simulation. Viewing this complex model from a systems perspective calls for the integration of different levels of behaviors. Complex interactions exist among stakeholders, the environment and available technology. The presence of continuous and discrete behaviors coupled with stochastic and deterministic behaviors present challenges for using standalone simulation tools to simulate the business model. We propose a framework that takes into account dynamic system complexity and risk from a hybrid paradigm. The SCOR model is employed to map the business processes and it is implemented using agent based simulation and system dynamics. By combining system dynamics at the strategy level with agent based models of consumer behaviors, an accurate yet efficient representation of the business model that makes for sound basis of decision making can be achieved to maximize stakeholders\u27 utility

Advances in Crowdfunding

This open access book presents a comprehensive and up-to-date collection of knowledge on the state of crowdfunding research and practice. It considers crowdfunding models and their different manifestations across a variety of geographies and sectors, and explores the perspectives of fundraisers, backers, platforms, and regulators. Gathering insights from a wide range of influential researchers in the field, the book balances concepts, theory, and case studies. Going beyond previous research on crowdfunding, the contributors also investigate issues of community, sustainability, education, and ethics. A vital resource for anyone researching crowdfunding, this book offers readers a deep understanding of the characteristics, business models, user-relations, and behavioural patterns of crowdfunding

An examination of the impact of foreign and local managers on firm resources: A case of micro and small serviced apartments in Riyadh - Saudi Arabia

Saudi Arabia (the largest oil exporting country in the world) is making an effort to diversify its economy, to decrease their dependence on the oil sector. The tourism market in Saudi Arabia is one of the biggest in the region and one of the most profitable sectors in the Middle East. The government has made a strong effort to improve and expand the tourism sector (e.g. introducing electronic visas). Accommodation is a vital element in the tourism sector, and it is very important to a destination’s image and competitiveness. As a part of the Saudisation policy, the Government has decided to localise the managers of hotels and serviced apartments by the end of 2020. This means hotels are more likely to be managed by local managers rather than foreign managers which has been the norm in Saudi Arabia. The Saudisation policy could have either a negative or a positive impact on firms’ performance. Riyadh is one of main cities to attract tourists and is dominated by micro and small serviced apartment enterprises. This decision might affect these enterprises since they depend on managers’ actions which, in turn, will affect the tourism industry. Therefore, it is important to investigate how local and foreign managers manage firm resources so that appropriate business support policy can be developed. The Resource-Based View has been the dominant theory for studying the relationship between firm resources and business performance. Existing studies have investigated the impact of different entrepreneurial characteristics of managers, and general traits such as age, gender and level of education on firm resources. However, no previous study examines the impact that managers’ background (local vs foreign) has on the development of firm resources. This research will be applying the concepts of Resource-Based Theory to examine the role played by local and foreign managers on firm resources. In doing so, this study will extend the boundary of Resource-Based View framework. To understand the different roles of local and foreign managers, it is also necessary to identify the key resources of micro and small serviced apartments. In order to accomplish this objective, existing studies related to local/foreign managers, micro and small enterprises, serviced apartments and four of the firms’ resources were critically analysed. I found that finance, human resources, technology and collaboration are critical for self-catering apartments and have a strong propensity to influence business performance. Following that, seven in-depth interviews were conducted at public institutions and nineteen interviews were conducted with local/foreign managers of micro and small serviced apartments. This study found that local and foreign managers take different approaches in developing firm resources and also face different sets of challenges while consuming them. The findings of this study provide useful recommendations to owners and managers of micro and small serviced apartments and to policy makers

Going Beyond Individual Differences: Exploring the Impact of Social Networks, Work Environment and Cross-Cultural Differences on Entrepreneurial Achievement

In academia and business, entrepreneurship has received considerable interest given its allure of autonomy, innovation and ability to produce considerable amounts of wealth and value (Hisrich, Langan-Fox & Grant, 2007). In essence, the start-up is the new ‘garage rock band’ with its promises of fame and fortune. Yet, this analogy is sobered by the fact that the majority of start-ups fail to grow and become sustainable businesses (Shane, 2008). In light of this, the question of which entrepreneurial ventures do go on to achieve success and grow, and in what contexts, becomes of primary interest. Given that entrepreneurship is a key driver of economic, technological and social progress, understanding the antecedents of entrepreneurial achievement has important theoretical and practical implications (Kuratko, 2007). Psychologists have conducted much research into the role of individual differences in the attainment of entrepreneurial achievements (e.g. organisational growth, innovation & value creation), alongside situational theorists who have identified the various ways in which contextual factors aid achievement. There remains however a significant lack of research that has attempted to integrate the two approaches. It is argued that doing so will extend both academic and practitioner understanding of how entrepreneurial talent is expressed, developed, and produces achievement. Using an interactionist approach (Tett & Burnett, 2003), this thesis sets forth the hypothesis that although an individual’s entrepreneurial talent is important, its relationship with achievement is influenced by relevant contextual factors that are expressed at the micro, meso and macro levels of the environment. Appreciating the wealth of situational entrepreneurship research, the current thesis explores this hypothesis across multiple levels of analysis. Particular attention is paid to the influences of social capital, organisational culture, and cross-cultural differences between developing economies. This thesis begins with a review of the psychological and contextual determinants of entrepreneurial achievement, and outlines key gaps in the literature. Based on this, a series of hypotheses were proposed that sought to explain how contextual factors influence the relationship between individual differences and entrepreneurial achievement. Together, this served as the theoretical foundation for subsequent empirical chapters. The first empirical chapter of this thesis integrated both personality and social capital theory (Burt, 2004), by using social network analysis to demonstrate the influence of social capital as a moderator in the relationship between personality traits and achievement. These results not only demonstrated the indirect effect individual differences holds with achievement, via social and relational factors, it also integrated two distinct research methodologies: psychometrics and social network analysis. There is much research that has explored what constitutes an organisation’s culture to be creative or innovative (Anderson, Potočnik & Zhou, 2014), yet, this is not the case when discussing entrepreneurship. Accordingly, the second empirical chapter describes the development and validation of such a psychometric measure. In particular, this measure assesses the extent to which an organisation’s culture supports and encourages entrepreneurial activity and achievement. This measure consists of four dimensions: Leadership Style, Employee Values, Empowerment & Team Behaviour. This Entrepreneurial Culture Inventory was found to hold concurrent and incremental validity in the prediction of entrepreneurial achievement, self-efficacy work engagement and employee’s intention to quit their jobs. Furthermore, it was found to positively moderate the relationship between entrepreneurial talent and achievement. These findings address a lack of understanding in how organisations can encourage entrepreneurial practices and achievements amongst their employees. The final empirical chapter sought to explore the stability of the entrepreneurial talent and achievement relationship across emerging market economies, and also whether differences in gender, socioeconomic and financial factors (e.g. macro contextual influences) mediated this relationship. Collecting data from a sample of over 18,000 microfinance loan applicants, across seven emerging market economies, a multi-group structural equation model revealed that the relationship between entrepreneurial talent and achievement is stable across a variety of countries. These analyses also found no gender differences in entrepreneurial talent between male and female entrepreneurs. In fact, it was found that the reason for gender differences in achievement is the result of external factors, namely, the type of business ventures males and females pursue, and the amount of funding each gender receives. These results demonstrated macro contextual factors to have a significant impact on achievement, irrespective of an individual’s level of entrepreneurial talent. These findings have implications for leaders and organisations that are responsible for growing a nation’s economy and promoting gender equality. Reviewing the discussed literature, and the results presented within each chapter, this thesis has successfully extended individual difference theories of entrepreneurship by integrating contextual factors. Specifically, the impact of context on this relationship was empirically demonstrated across micro, meso and macro levels of analysis. This suggests that although individual differences are important antecedents of entrepreneurial achievement, context plays a significant role in activating and enabling an individual’s entrepreneurial talent. More so, this research was carried out using a mixture of research methodologies and techniques, some of which are new to the study of individual differences and entrepreneurship. Together, it can be concluded that this thesis has addressed key gaps in current understanding, and contributed towards a growing body of psychological research. Recommendations for future research and practice are discussed

SUBSISTENCE URBAN MARKETS AND IN-COUNTRY REMITTANCES: A SOCIAL NETWORK ANALYSIS OF URBAN STREET VENDORS IN GHANA AND THE TRANSFER OF RESOURCES TO RURAL VILLAGES

This dissertation uses a mixed method approach to examine the determinants of internal remittances that are connected to the social networks of urban migrant street vendors. Urban street markets are a point of entry for many migrants moving from rural areas to cities in the Global South. The qualitative portion of the dissertation uses an ethnographic approach including participant observation, interviews and focus groups to examine the social networks of street vendors in a market in the municipality of Madina, Ghana. The quantitative analysis codes data from the ethnography in order to conduct a social network analysis using quadratic assignment procedure and logistic regression quadratic assignment procedure to analyze the relationship between attributes of street vendors and remittance behavior. Findings lead to several policy recommendations for the international community, as well as locally based non-governmental organizations, microfinance organizations, national and local governments providing funding or designing interventions affecting street markets or working with individual street vendors