Privacy protection laws, national culture, and artificial intelligence innovation around the world

Hyungseok David Yoon (), Mustapha Belkhouja () and Luis Alfonso Dau ()
Additional contact information
Hyungseok David Yoon: University of York
Mustapha Belkhouja: Grenoble Ecole de Management
Luis Alfonso Dau: Northeastern University

Journal of International Business Studies, 2025, vol. 56, issue 7, No 3, 853-873

Abstract: Abstract A substantial body of research highlights how stringent regulations disrupt innovators’ incentives and increase transaction costs, yet their information processing implication remains understudied. Building on information processing theory, we study how the interplay between formal and informal institutions shapes inventors’ information processing in developing artificial intelligence (AI) innovation. We examine the effect of stringent privacy regulations on AI innovation by exploiting the European Union’s General Data Protection Regulation (GDPR) announcement. We argue that, following the GDPR announcement, GDPR-affected countries experience lower national AI innovation rates than unaffected countries. Further, we postulate that this negative effect is weaker in GDPR-affected countries, marked by higher levels of individualism, masculinity, and indulgence, but stronger in the affected countries with higher levels of uncertainty avoidance, power distance, and long-term orientation. Our difference-in-differences analysis supports the proposed framework. Our research contributes to the international business literature by developing novel theoretical predictions at the intersection of comparative institutional analysis and national culture, explaining how privacy protection laws and cultural factors shape AI inventors’ information processing. Finally, this study provides insights into how inventors and entrepreneurs in countries with stringent privacy laws can leverage national culture to shape their AI innovation strategies and inform strategic decision-making.

Keywords: Artificial intelligence; Culture; Difference-in-differences; GDPR; Information processing theory; Privacy protection laws (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41267-025-00790-2 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:56:y:2025:i:7:d:10.1057_s41267-025-00790-2

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/s41267-025-00790-2

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().