Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333979 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
ETLA Working Papers No. 130
Publisher: 
The Research Institute of the Finnish Economy (ETLA), Helsinki
Abstract: 
This paper examines the effects of data privacy regulation on R&D investment in the pharmaceutical and biotechnology sectors. In these industries, access to personal health data is essential for innovation, particularly in clinical research. Leveraging a firm-level panel of the world's top R&D investors from 2013 to 2023, we exploit the staggered implementation of major data protection regimes to estimate their causal impact. Using a dynamic event-study design, we find that stricter privacy regulation leads to a significant decline in R&D spending. By year four after implementation, treated firms reduced R&D investment by approximately 39 percent. The effects are heterogeneous: firms without foreign affiliates and small and medium-sized enterprises experience larger declines. Our findings suggest that privacy regulation may constrain the foundations of data-driven innovation and shape the geographic distribution of R&D activity.
Subjects: 
Privacy regulation
R&D investment
Innovation
Pharmaceuticals
Biotechnology
Firm-level panel
GDPR
Compliance costs
JEL: 
D22
K23
L65
O32
O38
Document Type: 
Working Paper

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