Affiliate Joshua Lerner Studies the Effect of Privacy Policies on Venture Capital and Innovation
February 13, 2012
Supported by an Analysis Group team that included Managing Principals Lau Christensen, T. Christopher Borek, and Rebecca Kirk Fair, Vice President Peter Hess, and Manager Greg Rafert, Professor Lerner constructed a data set reflecting VC investment in online advertising companies and estimated multiple “difference-in-difference” regression models designed to test for a statistically significant decrease in VC investment in EU online advertising companies after the passage of the directive. (These econometric models measure the impact of an event at a given period in time, controlling for other factors.)
The team found that venture funding appears to have a strong positive impact on innovation and job creation. Their results also suggest that the EU privacy directive “has led to an incremental decrease in investment in EU-based online advertising companies of approximately $249 million over the approximately eight-and-a-half years from passage through the end of 2010. When paired with the findings of the enhanced effects of VC investment relative to corporate investment, this may be the equivalent of approximately $750 million to $1 billion in traditional R&D investment.”
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Read the related research paper, "The Impact of Copyright Policy Changes on Venture Capital Investment in Cloud Computing Companies"