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How Data Protection Regulation Affects Startup Innovation

Author

Listed:
  • Nicholas Martin

    (Fraunhofer ISI)

  • Christian Matt

    (University of Bern, Institute of Information Systems)

  • Crispin Niebel

    (Technische Universität Berlin, Chair of Innovation Economics)

  • Knut Blind

    (Fraunhofer ISI
    Technische Universität Berlin, Chair of Innovation Economics)

Abstract

While many data-driven businesses have seen rapid growth in recent years, their business development might be highly contingent upon data protection regulation. While it is often claimed that stricter regulation penalizes firms, there is only scarce empirical evidence for this. We therefore study how data protection regulation affects startup innovation, exploring this question during the ongoing introduction of the EU General Data Protection Regulation (GDPR). Our results show that the effects of data protection regulation on startup innovation are complex: it simultaneously stimulates and constrains innovation. We identify six distinct firm responses to the effects of the GDPR; three that stimulate innovation, and three that constrain it. We furthermore identify two key stipulations in the GDPR that account for the most important innovation constraints. Implications and potential policy responses are discussed.

Suggested Citation

  • Nicholas Martin & Christian Matt & Crispin Niebel & Knut Blind, 2019. "How Data Protection Regulation Affects Startup Innovation," Information Systems Frontiers, Springer, vol. 21(6), pages 1307-1324, December.
    • Handle: RePEc:spr:infosf:v:21:y:2019:i:6:d:10.1007_s10796-019-09974-2
    DOI: 10.1007/s10796-019-09974-2
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Garrett A. Johnson, 2022. "Economic Research on Privacy Regulation: Lessons from the GDPR and Beyond," NBER Chapters, in: The Economics of Privacy, National Bureau of Economic Research, Inc.
    2. Alessandro Acquisti & Tamara Dinev & Mark Keil, 2019. "Editorial: Special issue on cyber security, privacy and ethics of information systems," Information Systems Frontiers, Springer, vol. 21(6), pages 1203-1205, December.
    3. Amit Das & Shobha S. Das, 2022. "E-Government and Entrepreneurship: Online Government Services and the Ease of Starting Business," Information Systems Frontiers, Springer, vol. 24(3), pages 1027-1039, June.
    4. Jae Kyu Lee & Younghoon Chang & Hun Yeong Kwon & Beopyeon Kim, 2020. "Reconciliation of Privacy with Preventive Cybersecurity: The Bright Internet Approach," Information Systems Frontiers, Springer, vol. 22(1), pages 45-57, February.
    5. Pedro M. Gardete & Carlos D. Santos, 2020. "No data? No problem! A Search-based Recommendation System with Cold Starts," Papers 2010.03455, arXiv.org.
    6. Guangqin Li & Shiyu Lu & Shuai Shao & Lili Yang & Ke Zhang, 2021. "Do environmental regulations hamper small enterprises' market entry? Evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 252-266, January.
    7. Gregor Dorfleitner & Lars Hornuf & Julia Kreppmeier, 2023. "Promise not fulfilled: FinTech, data privacy, and the GDPR," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-29, December.
    8. Blind, Knut & Niebel, Crispin Miles & Rammer, Christian, 2022. "The impact of the EU General Data Protection Regulation on innovation in firms," ZEW Discussion Papers 22-047, ZEW - Leibniz Centre for European Economic Research.
    9. Anastasia A. Morosanova, 2023. "Strengthening personal data regulation in Russia: Economic implications and risks," Upravlenets, Ural State University of Economics, vol. 14(5), pages 29-46, November.
    10. Carl Benedikt Frey & Giorgio Presidente, 2024. "Privacy regulation and firm performance: Estimating the GDPR effect globally," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1074-1089, July.
    11. Anupriya Khan & Satish Krishnan & Jithesh Arayankalam, 2022. "The Role of ICT Laws and National Culture in Determining ICT Diffusion and Well-Being: A Cross-Country Examination," Information Systems Frontiers, Springer, vol. 24(2), pages 415-440, April.
    12. Gregor Dorfleitner & Lars Hornuf & Julia Kreppmeier, 2021. "Promise not Fulfilled: FinTech Data Privacy, and the GDPR," CESifo Working Paper Series 9359, CESifo.
    13. Philip Andreas Weber & Nan Zhang & Haiming Wu, 2020. "A comparative analysis of personal data protection regulations between the EU and China," Electronic Commerce Research, Springer, vol. 20(3), pages 565-587, September.

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