It is neither always possible (nor desirable) for the state in general, and regulatory agencies in particular, to regulate society purely through coercion. Rather, successful regulatory governance requires the ongoing cultivation of broad consent to, and support of, state actions through various ‘influence strategies’. These are actions designed to “persuade another actor to do something they would not otherwise do” e.g. strategic communications and image management (Lawrence and Buchanan 2017). Radical technological innovation is challenging to regulate through coercion due to legal and technical uncertainties, information asymmetries, and capital flight. Regulators, then, have to employ influence strategies in their responses to radical innovation.
Legitimate, high-reputation agencies are predicted to be more likely to successfully persuade others through influence strategies (Carpenter 2010; Deephouse and Suchman 2008; Gebrandy and Polanski 2015; Meyer and Rowan 1977). Agencies choose influence strategies (indeed, entire regulatory responses) based on predicted reputational effects (Maor 2010). One important area of agency strategy is the use and management of their accountability relationships and forums (Busuioc and Lodge 2015).
This paper examines the effect of agency reputation and legitimacy on the choice and success of influence strategies through analyzing how six national regulators responded to the emergence of cryptocurrency trading in their jurisdiction (e.g. Bitcoin). The comparative case study is informed by document analysis and key informant interviews. The paper evaluates whether, and to what extent, differences in agency legitimacy and reputation explain differences in the choice of, and persuasive effect of, influence strategies in accountability forums. The paper contributes to theory by bringing together insights from bureaucratic reputation and organizational institutionalism literatures to better understand success and failure in regulatory responses to radical innovation; and by further understanding the specific contribution of strategic accountability to regulatory outcomes.