Ban, Boom, and Echo! Entrepreneurship and Initial Coin Offerings

Abstract

Regulatory spillovers occur when regulation in one country affects either the expected regulatory approach and/or entrepreneurial finance markets in other countries. Drawing on institutional theory, we investigate the global implications of a regulatory spillover on entrepreneurship. We argue that regulatory spillovers have both short- and long-term effects on the number and quality of entrepreneurial finance initiatives such as Initial Coin Offerings (ICOs). Based on a large-scale sample of ICOs in 108 countries, we find that a regulatory ban of ICOs in one country causes a short-term increase in the number of low-rated ICOs in other countries and a long-term drop in the number of ICOs, especially low-rated, which increases the average ICO rating. That is, a restrictive regulation triggered a process of increased market selection.

Digitization in the Market for Entrepreneurial Finance: Innovative Business Models and New Financing Channels

“…Brummer and Yadav (2019) discuss several regulatory issues with fintech's trilemma, including regulatory sandboxes and pilot programs. The fact that regulators are tackling fintech issues differently also allows researchers to determine the effectiveness (and unwanted effects) of the different choices (Bellavitis et al, 2021;Cumming et al, 2021 partly build on this in this special issue). Interestingly, some of the new players happen to provide finance to the small and highly innovative firms that policymakers particularly care about, sometimes displacing existing intermediaries.…”

“…While dealing with the issues of regulation in ICOs may involve revisiting the entire concept of boundaries of the firm, addressing these questions is clearly an urgent priority. To this end Bellavitis et al (2021) provide a compelling empirical analysis of (a) how regulatory changes may have spillover effects in other countries and (b) how these regulatory spillover effects are different in the short term versus the long term. Their results indicate that following a ban on ICOs in China and Korea, other countries have experienced a sudden drop in offerings that however led to an increase in the quality of the offering flow to the market.…”

How can biases affect entrepreneurial decision making? toward a behavioral approach to unicorns

“…Thanks to these dynamics, entrepreneurial firms can tentatively produce different answers according to environmental change (Pellegrini & Ciappei, 2015;Scafarto et al, 2019). In this regard, as per our first contribution, we assume that founders and investors are inter-twined agents, at least from a cognitive perspective (Bellavitis et al, 2020;Dew et al, 2009). Indeed, the different biases that emerge from one party influence the perception of the other, and vice versa, according to a co-evolutionary logic (e.g., Adinolfi, 2021;Almudi & Fatas-Villafranca, 2021).…”

Eras of Digital Entrepreneurship

“…Cryptocurrency might also open access to external capital for digital ventures in the form of an initial coin offering (e.g., Fisch 2019 ; Ahluwalia et al 2020 ; Bogusz et al 2020 ; Huang et al 2020 ). Blockchain technology might spur new digital business models (Bellavitis et al 2020 ), for instance, by replacing typical intermediaries in electronic marketplaces (Kollmann et al 2020a , b ). Therefore, blockchain technology might act as an external enabler of future digital entrepreneurship, leading to “blockchain-enabled entrepreneurship” or “blockchain-supported entrepreneurship” (Chalmers et al 2021 ).…”