Organizational Barriers to Transforming Large Finance Corporations: Cloud Adoption and the Importance of Technological Architecture

50 Pages Posted: 6 Jul 2021 Last revised: 3 Apr 2023

See all articles by Sam (Ruiqing) Cao

Sam (Ruiqing) Cao

Stockholm School of Economics

Marco Iansiti

Harvard University - Business School (HBS)

Date Written: February 1, 2023

Abstract

This paper studies the impact of technological architecture around data storage and processing on the performance of large financial corporations after being exposed to more stringent data privacy regulations. A modular approach to cloud adoption – which reflects in the lack of data interoperability and reliance on microservices architecture – significantly constrains corporations’ ability to adapt after the GDPR became enforceable. We hypothesize that a modular approach to cloud adoption leads to uncontrolled scaling and data silos that hinder coordination and regulatory compliance. Using a difference-in-differences regression design, we find that establishment revenues lower by 30% among corporations substantially exposed to GDPR. Other corporations do not experience similar losses. We also find evidence consistent with theory using two alternative measures based on cloud vendor configurations.

JEL Classification: O3

Suggested Citation

Cao, Ruiqing and Iansiti, Marco, Organizational Barriers to Transforming Large Finance Corporations: Cloud Adoption and the Importance of Technological Architecture (February 1, 2023). Harvard Business School Research Paper Series No. 21-122, Available at SSRN: https://ssrn.com/abstract=3874116 or http://dx.doi.org/10.2139/ssrn.3874116

Ruiqing Cao (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Marco Iansiti

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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