Growing Entrepreneurship with Cryptocurrency Tokens

Posted: 29 Oct 2019 Last revised: 4 Nov 2019

See all articles by Wei Chen

Wei Chen

University of Arizona - Eller College of Management

Karen Xie

University of Denver, Daniels College of Business

Weifeng Li

University of Georgia

Date Written: October 18, 2019

Abstract

Initial coin offerings (ICOs) are a new method of raising capital for early stage ventures and jumping-start the network effect. In an ICO, a blockchain-based issuer sells cryptographically secured digital assets, usually called tokens. A token’s value is tied to work that grows the network through open-source software development, and tokens are often used to compensate developers. We study the post-ICO Github-based technological development of token developers and examines what financial and operating characteristics of tokens affect tangible developmental outcomes that would facilitate an ICO issuer’s progress toward entrepreneurial goals. Quasi-experimental analyses find that success is associated with a token’s quality signals and liquidity on exchange listing, both driving higher open-source development. The mechanism centers on the incentive alignment that solves coordination problems in entrepreneurial growth: the developers’ token ownership.

Keywords: Blockchain, Initial Coin Offering (ICO), Exchange Listing, Open-source Software, Internal and External Contributors

JEL Classification: L26, L17, G23, G24

Suggested Citation

Chen, Wei and Xie, Karen and Li, Weifeng, Growing Entrepreneurship with Cryptocurrency Tokens (October 18, 2019). Available at SSRN: https://ssrn.com/abstract=3472069

Wei Chen (Contact Author)

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Karen Xie

University of Denver, Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

Weifeng Li

University of Georgia ( email )

610 S. Lumpkin St.
Benson C404
Athens, GA 30602
United States

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