Smith PhD Candidate’s Award-Winning Research Focuses on the Digitization of Microfinance

Mingfeng Lin, a PhD candidate at the University of Maryland’s Robert H. Smith School of Business, is studying the value of online social networks and “social commerce” and he has won a handful of awards along the way, including the prestigious Ewing Marion Kauffman Foundation Dissertation Fellowship (2009-10).

Online social networks such as Facebook, LinkedIn and MySpace, powered by the growth in digitization and Internet technologies, have dramatically altered the way users interact and connect with each other. Increasingly, these online social networks are serving as the cornerstone for new business models that promise to transform traditional commerce in several industries. One industry where “social commerce,” as this phenomenon is aptly named, is having a transformative effect is financial lending. Online peer-to-peer (P2P) lending, where individual investors provide unsecured microloans directly to individual borrowers without the intermediation of financial institutions, has experienced rapid growth in recent months, with new loan expected to reach a billion dollars by 2010. Unlike traditional lending which is coordinated by a centralized institution (e.g. banks), online P2P lending is largely decentralized with individual lenders making lending decisions independently, or as part of a network of lenders.

“Given the unique features of online P2P lending, and its potential to disrupt traditional institutional lending models, my dissertation employs a multi-disciplinary perspective on social lending to examine this new phenomenon,” says Lin. “Specifically, my thesis seeks to examine and quantify the value provided by online social networks to the various stakeholders. In addition, my thesis will also examine the potential of such online P2P lending markets as an alternate channel for entrepreneurial funding.”

Lin has been working under the guidance of Professor Siva Viswanathan (Decision, Operations, and Information Technologies), who studies how the latest developments in technology have been transforming the retail, advertising and financial sectors. “Not only do I find this research to be intellectually stimulating, it also has academic and practical significance,” says Lin. “For researchers, answers to these questions should provide insights into not only the emerging P2P lending industry but also ‘social commerce’ business models in general. While the importance of network has been widely accepted, this research could provide some quantification of its value, as well as some boundary conditions to that claim. For practitioners and policy makers, this research would help them better understand the underlying dynamics of peer-to-peer lending and the business values of such online communities. More generally, these studies will demonstrate the potential of this new channel as opportunities of both investment and for obtaining loans, either for regional development or business growth. The results of these studies should also provide valuable guidelines for practitioners seeking to embrace this new business model, as well as for traditional financial institutions seeking new ways of managing risk in the light of recent lending fiascoes.”

Lin’s timely dissertation topic has been the recipient of numerous prestigious awards. He was a winner of the Doctoral Fellowship awarded by the Economic Club of Washington, D.C. This fellowship is jointly offered by the Economic Club of Washington and the Consortium of Universities of the Washington Metropolitan Area (CUWMA).  Each year, two stipends each worth $10,000, are awarded to doctoral-level students from consortium institutions to support independent research. The Economic Club of Washington was organized in 1986 by more than 300 of the area’s top business and professional leaders. Its primary purposes are to provide a forum for prominent business and government leaders, and to bring together and promote a greater sense of community among business leaders and government officials, particularly in the greater Washington, D.C., area. Detailed information about the fellowship program can be found on their Web site, http://www.economicclub.org/.

“One of the issues that I focus on in my dissertation is the feasibility of using the peer-to-peer lending mechanism as a new channel for entrepreneurial funding,” says Lin. “The current financial crisis has significantly diminished the chances of entrepreneurial funding from traditional financial institutions and venture capitals, and the peer-to-peer lending business model could provide a valuable alternative to entrepreneurs.” In April 2008, the Dingman Center for Entrepreneurship of the Smith School of Business hosted a competition of research papers among PhD students of the Smith School. An earlier version of Lin’s research proposal was the winner in the “Research Proposal” category. The Dingman Center is actively engaged in both the research and practice of innovation and entrepreneurship, not only within the Smith community, but it also connects Smith researchers with outside experts and practitioners.

More recently, Lin received the Ewing Marion Kauffman Foundation Dissertation Fellowship (2009-2010). The Kauffman Foundation was established in the mid-1960s by the late entrepreneur and philanthropist Ewing Marion Kauffman. Based in Kansas City, Missouri, the Kauffman Foundation is the thirtieth largest foundation in the United States with an asset base of approximately $2 billion. The vision of the Kauffman Foundation is to foster “a society of economically independent individuals who are engaged citizens, contributing to the improvement of their communities.”  It is also a major sponsor of the recent Global Entrepreneurship Week (November 17 – 23, 2008).  Every year since 2002, the Kauffman Foundation awards approximately 15 dissertation proposals in the U.S. This year, 15 proposals were selected from over 100 submitted proposals. Detailed information about this fellowship as well as a list of past awardees can be found on their Web site, http://sites.kauffman.org/KDFP. 

This past summer, Lin was chosen to participate in the summer doctoral program at the University of Oxford, hosted by the Oxford Internet Institute. The Oxford Internet Institute (OII) was founded in 2001 as a department in the University of Oxford, UK. Located within the Balliol College, it has become “an academic center for the study of the societal implications of the Internet”. Since 2003, OII has hosted annual Summer Doctoral Programs (SDP) with research institutions around the world, such as Berkman Center for Internet & Society of Harvard University in 2007. The 2008 OII SDP was co-hosted by the Web Science Research Initiative (WSRI), a cross-disciplinary research organization established by prominent researchers including Sir Tim Berners-Lee, inventor of the Internet.  

OII SDP 2008 was held on the campus of Oxford from July 13-26, 2008. Twenty-nine students from around the world were chosen out of a competitive pool of applicants. They came from a variety of backgrounds including computer science, economics, communications, law, and business. Sir Tim Berners-Lee and 23 other prominent professors from Harvard, MIT, Oxford, and University of Southampton (UK) attended the SDP. Covered in the two-week program were both technical topics and related social, economic and legal issues. “The OII SDP has been a truly invaluable experience for me, especially for my dissertation,” says Lin. “More than an opportunity to present my study and solicit feedback from fellow students and faculty members, it is also provided a window into research in other Internet-related topics (including social, economic, and legal issues) and to establish potential collaborations. All this was made possible due to the generous financial support from OII and CIBER (Center for International Business Education and Research) of the Smith School. Most important of all, none of these awards or programs would have been possible without the help and encouragement of my advisor, Professor Siva Viswanathan.”