GDPR and the Lost Generation of Innovative Apps

Paper by Rebecca Janßen, Reinhold Kesler, Michael E. Kummer & Joel Waldfogel: “Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation…(More)”.

Data and Market Power

Paper by Jan Eeckhout & Laura Veldkamp: “Might firms’ use of data create market power? To explore this hypothesis, we craft a model in which economies of scale in data induce a data-rich firm to invest in producing at a lower marginal cost and larger scale. However, the model uncovers much richer interactions between data, welfare and market power. Data affects risk, firm size and the composition of the goods firms produce, all of which affect markups. The tradeoff between these forces depends on the level of aggregation at which markups are measured. Empirical researchers who measure markups at the product level, firm level or industry level come to different conclusions about trends and cyclical fluctuations in markups. Our results reconcile and re-interpret these facts. The divergence between product, firm and industry markups can be a sign that firms are using data to reallocate production to the goods consumers want most….(More)”.

Corporate Political Responsibility

Report by Dieter Zinnbauer: “How business acts in the political arena has a substantive, at times defining, impact on the integrity and fairness of policymaking and policy outcomes. Unfortunately, the conventional approach for regulating corporate conduct in this area faces a number of persistent challenges.

A confluence of several important dynamics, however, offers the promise that responsible corporate political conduct can be encouraged and advanced from a very different vantage point—a new ecosystem for corporate political responsibility is in the making. This ecosystem comes with a new cast of actors, new soft and hard accountability mechanisms and a trove of new resources, tools and collective action initiatives.

This Discussion paper presents an overview of this new governance regime, identifies the dynamics that drive its evolution, describes its main building blocks and discusses its limitations. Most importantly it lays out several suggestions for policymakers and practitioners for how the potential of this new accountability regime can be fully utilized to support political integrity and how it can be most productively interlinked with conventional money-in-politics regulations for maximum benefit….(More)”.

Radically Human: How New Technology Is Transforming Business and Shaping Our Future

Book by Paul Daugherty and H. James Wilson: “Technology advances are making tech more . . . human. This changes everything you thought you knew about innovation and strategy. In their groundbreaking book, “Human + Machine,” Accenture technology leaders Paul R. Daugherty and H. James Wilson showed how leading organizations use the power of human-machine collaboration to transform their processes and their bottom lines. Now, as new AI powered technologies like the metaverse, natural language processing, and digital twins begin to rapidly impact both life and work, those companies and other pioneers across industries are tipping the balance even more strikingly toward the human side with technology-led strategy that is reshaping the very nature of innovation. In “Radically Human,” Daugherty and Wilson show this profound shift, fast-forwarded by the pandemic, toward more human–and more humane–technology. Artificial intelligence is becoming less artificial and more intelligent. Instead of data-hungry approaches to AI, innovators are pursuing data-efficient approaches that enable machines to learn as humans do. Instead of replacing workers with machines, they’re unleashing human expertise to create human-centered AI. In place of lumbering legacy IT systems, they’re building cloud-first IT architectures able to continuously adapt to a world of billions of connected devices. And they’re pursuing strategies that will take their place alongside classic, winning business formulas like disruptive innovation. These against-the-grain approaches to the basic building blocks of business–Intelligence, Data, Expertise, Architecture, and Strategy (IDEAS)–are transforming competition. Industrial giants and startups alike are drawing on this radically human IDEAS framework to create new business models, optimize post-pandemic approaches to work and talent, rebuild trust with their stakeholders, and show the way toward a sustainable future….(More)”.

The Modem World: A Prehistory of Social Media

Book by Kevin Driscoll: “Fifteen years before the commercialization of the internet, millions of amateurs across North America created more than 100,000 small-scale computer networks. The people who built and maintained these dial-up bulletin board systems (BBSs) in the 1980s laid the groundwork for millions of others who would bring their lives online in the 1990s and beyond. From ham radio operators to HIV/AIDS activists, these modem enthusiasts developed novel forms of community moderation, governance, and commercialization. The Modem World tells an alternative origin story for social media, centered not in the office parks of Silicon Valley or the meeting rooms of military contractors, but rather on the online communities of hobbyists, activists, and entrepreneurs. Over time, countless social media platforms have appropriated the social and technical innovations of the BBS community. How can these untold stories from the internet’s past inspire more inclusive visions of its future?…(More)”.

Valuing Financial Data

Paper by Maryam Farboodi, Dhruv Singal, Laura Veldkamp & Venky Venkateswaran: “How should an investor value financial data? The answer is complicated because it depends on the characteristics of all investors. We develop a sufficient statistics approach that uses equilibrium asset return moments to summarize all relevant information about others’ characteristics. It can value data that is public or private, about one or many assets, relevant for dividends or for sentiment. While different data types have different valuations, heterogeneous investors value the same data very differently, which suggests a low price elasticity for data demand. Heterogeneous investors’ data valuations are also affected very differentially by market illiquidity…(More)”.

Using Competitors’ Data – A Role for Competition Law? Some Thoughts on the Amazon Marketplace Case

Paper by Iga Malobecka: “Based on the Commission’s investigation into Amazon’s practices, the article analyses whether Amazon’s use of sensitive data from independent retailers who sell via its marketplace may raise anticompetitive concerns and, if so, how they should be tackled, in particular, whether competition law is the right tool to address these concerns. Amazon’s conduct, which is being investigated by the Commission, does not easily fit in with well-established theories of harm. Therefore, it is proposed to develop new theories of harm that would be specifically tailored to challenges of digital markets and online platforms’ business models. Amazon’s conduct could be regarded as a forced free-riding, predatory copying, abusive leveraging or self- preferencing. It is also argued that some of the competition concerns that may arise from the use of competitors’ data by online intermediation platforms such as Amazon could be more efficiently tackled by introducing a regulation, such as the Digital Markets Act…(More)”.

The GDPR effect: How data privacy regulation shaped firm performance globally

Paper by Carl Benedikt Frey and Giorgio Presidente:  “…To measure companies’ exposure to GDPR, we exploit international input-output tables and compute the shares of output sold to EU markets for each country and 2-digit industry. We then construct a shift-share instrument interacting this share with a dummy variable taking the value one from 2018 onwards.

Based on this approach, we find both channels discussed above to be quantitatively important, though the cost channel consistently dominates. On average, across our full sample, companies targeting EU markets saw an 8% reduction in profits and a relatively modest 2% decrease in sales (Figure 1). This suggests that earlier studies, which have focused on online outcomes or proxies of sales, provide an incomplete picture since companies have primarily been adversely affected through surging compliance costs. 

While systematic data on firms’ IT purchases are hard to come by, we can explore how companies developing digital technologies have responded to GDPR. Indeed, taking a closer look at some recent patent documents, we note that these include applications for technologies like a “system and method for providing general data protection regulation (GDPR) compliant hashing in blockchain ledgers”, which guarantees a user’s right to be forgotten. Another example is a ‘Data Consent Manager’, a computer-implemented method for managing consent for sharing data….

While the results reported above show that GDPR has reduced firm performance on average, they do not reveal how different types of firms have been affected. As is well-known, large companies have more technical and financial resources to comply with regulations (Brill 2011), invest more in lobbying (Bombardini 2008), and might be better placed to obtain consent for personal data processing from individual consumers (Goldfarb and Tucker 2011). For example, Facebook has reportedly hired some 1,000 engineers, managers, and lawyers globally in response to the new regulation. It also doubled its EU lobbying budget in 2017 on the previous year, when GDPR was announced. Indeed, according to, Google, Facebook and Apple now rank among the five biggest corporate spenders on lobbying in the EU, with annual budgets in excess of €3.5 million.

While these are significant costs that might reduce profits, the impact of the GDPR on the fortunes of big tech is ambiguous. As The New York Times writes, “Whether Europe’s tough approach is actually crimping the global tech giants is unclear… Amazon, Apple, Google and Facebook have continued to grow and add customers”. Indeed, by being better able to cope with the burdens of the regulation, these companies may have increased their market share at the expense of smaller companies (Johnson et al. 2020, Peukert et al. 2020). …(More)”.

Society won’t trust A.I. until business earns that trust

Article by François Candelon, Rodolphe Charme di Carlo and Steven D. Mills: “…The concept of a social license—which was born when the mining industry, and other resource extractors, faced opposition to projects worldwide—differs from the other rules governing A.I.’s use. Academics such as Leeora Black and John Morrison, in the book The Social License: How to Keep Your Organization Legitimate,define the social license as “the negotiation of equitable impacts and benefits in relation to its stakeholders over the near and longer term. It can range from the informal, such as an implicit contract, to the formal, like a community benefit agreement.” 

The social license isn’t a document like a government permit; it’s a form of acceptance that companies must gain through consistent and trustworthy behavior as well as stakeholder interactions. Thus, a social license for A.I. will be a socially constructed perception that a company has secured the right to use the technology for specific purposes in the markets in which it operates. 

Companies cannot award themselves social licenses; they will have to win them by proving they can be trusted. As Morrison argued in 2014, akin to the capability to dig a mine, the fact that an A.I.-powered solution is technologically feasible doesn’t mean that society will find its use morally and ethically acceptable. And losing the social license will have dire consequences, as natural resource companies, such as Shell and BP, have learned in the past…(More)”

Japan to pitch data-sharing framework to bolster Asia supply chains

Nikkei coverage: “The Japanese government is set to propose a scheme to promote data-sharing among companies in Asia to strengthen supply chains in the region, Nikkei has learned.

The Ministry of Economy, Trade and Industry (METI) hopes that a secure data-sharing framework like the one developed in Europe will enable companies in Asia to smoothly exchange data, such as inventory information on products and parts, as well as information on potential disruptions in procurement.

The ministry will propose the idea as a key part of Japan’s digital trade policy at an expert panel meeting on Friday. The meeting will propose a major review of industrial policy to emphasize digitization and a decarbonized economy.

It sees Europe’s efforts as a role model in terms of information-sharing. The European Union is building a data distribution infrastructure, Gaia-X, to let companies in the region share information on supply chains.

The goal is to counter the monopoly on data held by large technology companies in the U.S. and China. The EU is promoting the sharing of data by connecting different cloud services among companies. Under Gaia, companies can limit the scope of data disclosure and the use of data provided to others, based on the concept of data sovereignty.

The scheme envisioned by METI will also allow companies to decide what type of data they share and how much. The infrastructure will be developed on a regional basis, with the participation of various countries.

Google and China’s Alibaba Group Holding offer data-sharing services for supply chain, but the Japanese government is concerned that it will be difficult to protect Japanese companies’ industrial secrets unless it develops its own data infrastructure….(More)”