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Growth and Innovation in the Modern Data Economy

Author

Listed:
  • Orlando Gomes

    (Lisbon Accounting and Business School)

  • Roxana Mihet

    (University of Lausanne, Swiss Finance Institute and CEPR)

  • Kumar Rishabh

    (University of Basel and University of Lausanne)

Abstract

In this paper, we formulate a growth model of the data economy, highlighting data's dual role as a business optimization tool and a cybercrime target. We investigate the impact of cybercrime on firm innovation and economic growth, finding that it unequivocally leads to reduced knowledge stocks, decreased productivity, and slower overall economic growth for all firms. However, there is a silver lining: cybercrime risk prompts data-intensive companies to pursue digital innovation, enhancing productivity in other domains. We observe increased R&D, patenting, and patent diversity in response to higher cyber risk, especially among data-intensive firms. Non-data-intensive firms do not exhibit increased general innovation in response to cyber risk. Notably, in-house cybersecurity innovation sustains this cycle, while third-party cybersecurity delegation lacks the same innovation benefits.

Suggested Citation

  • Orlando Gomes & Roxana Mihet & Kumar Rishabh, 2023. "Growth and Innovation in the Modern Data Economy," Swiss Finance Institute Research Paper Series 23-86, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2386
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4559921
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    More about this item

    Keywords

    Data economy; data theft; data breaches; cyber-risk; growth; artificial intelligence; innovation;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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