Data privacy regulation and cross-border e-commerce

Abstract

The rise of big data in the global economy has altered the ways in which firms do international business. The digital revolution has also changed how international business is regulated. Personal information protection is one of the new challenging regulatory issues. In this study, we build a framework to discuss how data privacy regulation affects cross-border e-commerce. We show that data privacy regulation has four effects: the web traffic effect, the data collection effect, the advertising effect and the data sharing effect, all of which negatively affect cross-border e-commerce. We also demonstrate the heterogenous effects of data privacy regulation. Specifically, we argue that data privacy regulation has a stronger cross-border e-commerce reduction effect on countries with higher labor cost and marketing cost, and data privacy regulation has a larger negative effect on cross-border e-commerce for differentiated products than homogenous products. By empirically testing the impact of General Data Protection Regulation on cross-border e-commerce between 183 countries and European Union countries from 2015 to 2020, we confirm all the proposed hypotheses. There are few studies exploring specifically how data privacy regulation affects cross-border e-commerce. We contribute to the literatures by filling this gap. Our research results provide new insights for multinational companies and public policymakers on this globally important issue in the digital age.