Institutional Legitimacy and New Market Emergence: the Case of Bitcoin Trading

Andrew Jay Isaak, Suleika Bort and Michael Woywode

EconStor Conference Papers from ZBW - Leibniz Information Centre for Economics

Abstract: Research has shown that cognitive, normative, and regulative legitimacy are important for new market emergence. Little known, however, are the conditions and dynamics under which these three forms of legitimacy interact over time and in different institutional settings. In this study, we investigate the emergence and development of the new market for cryptocurrencies (i.e., Bitcoin) using a comprehensive dataset on trading in 49 countries between 2010 and 2020. Our study reveals that all three forms of legitimacy drive Bitcoin trading. Surprisingly, we also found increases in trading volume when Bitcoin was declared illegal and when normative support preceded, rather than followed, regulative legitimacy. Our results shed light on the relationship between cognitive, normative, and regulative legitimacy and their interactions in the emergence and development of a new contested market over time.

Keywords: Bitcoin; New Market Emergence; Cryptocurrency; Institutional Theory; Panel Regression; Cross-National Dataset (search for similar items in EconPapers)
JEL-codes: D02 E44 F65 G23 K22 O16 O33 P48 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esconf:338890

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