Limitations of Imitation: Lessons from another Bitcoin Copycat

Abstract

We find strong evidence that imitation to the leader in an uncertain environment provides short-term early success without enhancing long-term survival. Using a unique setting in cryptocurrencies where Bitcoin has been the centre focus, we define copycats as cryptocurrencies that have a name similar to Bitcoin. Our results show copycats earn higher returns in the first four weeks of trading but have a lower survival rate comparing to non-copycats and are robust to an alternative definition of copycat and an instrumental variable. Our results highlight that in an age of information, coupled with an uncertain market created by a novel technology, the name of an organization may be a strong signal to investors when other signals are unclear.

Keywords: Copycats, Imitation, Isomorphism, Blockchain

JEL Classification: G10, G40, L10, L20