GDPR and the Localness of Venture Investment

49 Pages Posted: 16 Aug 2019 Last revised: 18 Aug 2019

See all articles by Jian Jia

Jian Jia

Illinois Institute of Technology - Stuart School of Business

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Liad Wagman

Illinois Institute of Technology - Stuart School of Business, IIT

Date Written: August 1, 2019

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 has a negative effect on 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 with respect to lead investors that invest across different industries.

Keywords: GDPR, investment, home bias, technology, new ventures

JEL Classification: G11, K20, D8

Suggested Citation

Jia, Jian and Jin, Ginger Zhe and Wagman, Liad, GDPR and the Localness of Venture Investment (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3436535 or http://dx.doi.org/10.2139/ssrn.3436535

Jian Jia (Contact Author)

Illinois Institute of Technology - Stuart School of Business ( email )

Stuart Graduate School of Business
565 W. Adams St. 4th floor
Chicago, IL 60661
United States

Ginger Zhe Jin

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Liad Wagman

Illinois Institute of Technology - Stuart School of Business, IIT ( email )

565 W Adams St Suite 412
Chicago, IL 60661
United States
7739809883 (Phone)

HOME PAGE: http://https://lwagman.org

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