We revisit the role of formal and informal institutional environments in deterring ethically questionable activities conducted through digital channels. While stronger regulations seek to curb ethically questionable digital activities, we suggest that informal institutions in certain countries may diverge from formal regulations, creating attractive demand-side opportunities that compel businesses to surpass regulatory constraints and engage in ethically questionable digital activities. We further suggest that such divergence between formal and informal institutions is more prominent in countries with higher digital usage. By analyzing a large dataset on ethically questionable digital activities carried across 82 countries, we find empirical support for our theoretical contentions.
