GDPR and the Localness of Venture Investment
Stuart School of Business research presentation by: Jian Jia, Stuart Ph.D. student and Associate Professor of Economics Liad Wagman
GDPR and the Localness of Venture Investment
- Associate Professor of Economics Liad Wagman
- Jian Jia, Stuart Ph.D. student
Abstract:
We examine how investors’ tendency to prefer investing in local ventures interacts with the effects of the General Data Protection Regulation (GDPR) on venture investment in the European Union (EU). Using five-year investment data in EU and US ventures, we demonstrate that GDPR’s enactment and rollout differentially affect investors as a function of their proximity to ventures. Specifically, we show that GDPR’s rollout in 2018 hurts EU venture investment, and the effects are higher when ventures and lead investors are not in the same country or union. The relationship manifests in the number of deals per month and in the amount invested per deal and is particularly pronounced for newer and data-related ventures. We further show that GDPR’s enactment in 2016 exhibits similar effects but only concerning lead investors that invest across different industries.
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