Upward convergence: digital regulations and digital firms’ internationalization
The GDPR helps low data-dependent and explorative digital products penetrate the EU and may drive convergence rather than fragmentation.
Summary
The study argues that digital regulation can create opportunities for digital firms, not only barriers. It compares 835 iOS game apps from the 500 highest-revenue mobile game developers, before and after the EU's GDPR took effect in May 2018, using non-EU markets as the control group. After the regulation, apps that do not depend on data-collecting software saw penetration in the EU rise by about 14%, while data-dependent apps fell by about 8%, and highly explorative products, those most unlike the developer's existing portfolio, gained about 50% in user acquisition against about 12% for the least explorative ones. Success in the EU also became a much stronger predictor of entering other markets, with the probability of non-EU entry rising from 21% to 64%. The authors call this upward convergence: designing to the strictest standard lets a firm deploy one product globally instead of fragmenting by regime, so the EU can act as a global benchmark for product design.
Editor's opinion
Strict regulation can work in favour of firms that design for it. After GDPR, products that did not rely on personal data and new, exploratory products gained ground in Europe, and success there became a stronger springboard to other markets. Digital firms should treat the toughest regime as the global design standard, since that lets them scale one product across borders.
Key concepts
GDPR · digital internationalization · virtual presence · regulation