When Startups Innovate their Fundraising Strategy: Understanding the Frictions Shaping the Success of Initial Coin Offerings

Management, and especially entrepreneurship, research has often overlooked the fact that the effects of quality signals may vary across different information environments. Indeed, in a cognitively demanding environment, the potential of quality signals to resolve information asymmetries may dissipate. In this study, we inspect the direct and indirect effects of signaling environment on the outcomes of fundraising efforts of entrepreneurial ventures using Initial Coin Offerings (ICOs). We postulate that two dimensions of signaling environment (i.e., information amount and information variation) result in less favorable funding outcomes for entrepreneurial ventures because these dimensions increase cognitive costs for investors, resulting in information overload and making investors hesitate to provide funding. A unique sample of 1,104 ICO projects provides support for our hypotheses.