The nature and sources of international variation in formal institutions related to initial coin offerings: preliminary findings and a research agenda

As prior researchers have suggested, a firm’s success in an international market depends on how well its strategy fits the nonmarket environment, such as formal institutions. This paper examines the determinants of formal institutions around new areas of economic activities. Specifically, we propose a framework for understanding how the quality of formal institutions in promoting entrepreneurship drives the focus of such institutions concerning initial coin offering (ICO), which is emerging as a popular fundraising method. The paper uses inductive analysis to examine how nonmarket factors—such as a jurisdiction’s tax haven nature, regulators’ perceptions of ICOs as threats to national or political interests, and trade and industry associations—might moderate the relationship between the quality of institutions and the focus of such institutions regarding ICOs. One of this study’s key findings is that an economy’s quality of entrepreneurship-related institutions, perceived threats to national/political interests, and tax haven nature lead to different policy orientations. Consequently, regulators assign different importance when promoting crypto-entrepreneurship and dealing with associated risks. Regulators focusing mainly on promoting crypto-ventures have taken measures to enrich the blockchain ecosystem and provided tax and non-tax incentives to attract such ventures. Regulators focusing mainly on dealing with crypto-venture risks rely on a regulatory sandbox and close regulatory monitoring of such ventures.