---
title: "Privacy Regulation and R&D Investments: Causal Evidence from Global Pharmaceutical and Biotechnology Firms"
authors:
  - name: "Koski, Heli"
    url: "https://www.etla.fi/henkilot/koski-heli/"
    sameAs:
      - "https://twitter.com/heli_koski"
date_published: "2025-08-11"
series: "ETLA Working Papers"
series_number: "130"
issn:
  - "2323-2420"
  - "2323-2439"
jel_codes:
  - "D22"
  - "K23"
  - "L65"
  - "O32"
  - "O38"
language: "en"
publisher: "ETLA Economic Research"
pdf_url: "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-130.pdf"
keywords:
  - "Privacy regulation"
  - "R&D investment"
  - "Innovation"
  - "Pharmaceuticals"
  - "Biotechnology"
  - "Firm-level panel"
  - "GDPR"
  - "Compliance costs"
identifier: "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-130"
abstract: "This paper examines the effects of data privacy regulation on R&D investment in the pharmaceutical and biotechnology sectors. In these industries, access to personal health data is essential for innovation, particularly in clinical research. Leveraging a firm-level panel of the world’s top R&D investors from 2013 to 2023, we exploit the staggered implementation of major data protection regimes to estimate their causal impact. Using a dynamic event-study design, we find that stricter privacy regulation leads to a significant decline in R&D spending. By year four after implementation, treated firms reduced R&D investment by approximately 39 percent. The effects are heterogeneous: firms without foreign affiliates and small and medium-sized enterprises experience larger declines. Our findings suggest that privacy regulation may constrain the foundations of data-driven innovation and shape the geographic distribution of R&D activity."
---

# Privacy Regulation and R&D Investments: Causal Evidence from Global Pharmaceutical and Biotechnology Firms

**Published:** 2025-08-11  
**Categories:** Working Papers  
**Tags:** ETLA-WEF  
**URL:** https://www.etla.fi/en/publications/working-papers-en/privacy-regulation-and-rd-investments-causal-evidence-from-global-pharmaceutical-and-biotechnology-firms/

#### Abstract

This paper examines the effects of data privacy regulation on R&D investment in the pharmaceutical and biotechnology sectors. In these industries, access to personal health data is essential for innovation, particularly in clinical research. Leveraging a firm-level panel of the world’s top R&D investors from 2013 to 2023, we exploit the staggered implementation of major data protection regimes to estimate their causal impact. Using a dynamic event-study design, we find that stricter privacy regulation leads to a significant decline in R&D spending. By year four after implementation, treated firms reduced R&D investment by approximately 39 percent. The effects are heterogeneous: firms without foreign affiliates and small and medium-sized enterprises experience larger declines. Our findings suggest that privacy regulation may constrain the foundations of data-driven innovation and shape the geographic distribution of R&D activity.

---

## Additional Information

**Kirjoittajat:** Koski, Heli

**Kansikuva:** https://www.etla.fi/wp-content/uploads/etla-working-papers-130-kansi.jpg

**Lataa Pdf:** https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-130.pdf

**Key Words:** Privacy regulation, R&D investment, Innovation, Pharmaceuticals, Biotechnology, Firm-level panel, GDPR, Compliance costs

**Jel:** D22, K23, L65, O32, O38

**Paivays:** 11.08.2025

**Sivuja:** 30

**Kieli:** en

**Sarja:** ETLA Working Papers

**Sarja Nro:** 130

**Issn:** 2323-2420, 2323-2439 (Pdf)

**Saatavuus:** 2

93208

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