October 21, 2025
The GIST AI innovation drops under EU data regulations, researcher says 
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The European Union's data privacy regulations have reduced artificial intelligence innovation, according to Northeastern University research. The extent of this dampening, however, depends on individual countries' culture, the researcher says.
"There are trade-offs to having stringent data protection policies," says Luis Alfonso Dau, Robert & Denise DiCenso faculty fellow and associate professor of international business and strategy at Northeastern.
"On the one hand, governments seek to protect consumers from business malfeasance, opportunism, and the potential threats and negative consequences of artificial intelligence; on the other hand, they seek to empower domestic companies to be globally competitive in artificial intelligence innovation.
"Balancing and reconciling these two priorities poses a significant challenge for countries and firms," Dau continues. "This balancing act is much more nuanced and complex than it appears."
The General Data Protection Regulation (GDPR) was put into effect in May 2018, and protects the personal data and privacy of individuals within the EU by imposing obligations onto organizations that target or collect data related to people in the union.
To examine its effect on AI innovation, Dau analyzed data on more than 550,000 patents related to AI filed with the United States Patent and Trademark Office across 48 countries from 2000 to 2019. This enabled him to compare the number of AI patents issued by countries per year.
In research published in the Journal of International Business Studies, Dau found that countries that follow the GDPR and similar regulations have lower levels of AI innovation.
"As governments increase data protection regulations, this creates obstacles for innovation within domestic AI companies, making it harder for them to compete with other global players in this space," Dau says.
But the negative effects on innovation were not uniform.
So, using Geerte Hofstede's cultural values dimensions—individualism vs. collectivism, assertiveness, uncertainty avoidance (risk aversion), power distance (the difference between those in power and those not in power), long-term vs. short-term orientation and indulgence vs. restraint—Dau examined the impact of culture on the negative effects of GDPR on AI innovation.
Dau found that countries with higher cultural levels of individualism, assertiveness and indulgence were affected to a lesser extent by GDPR. Examples of these countries include the Netherlands, Denmark and Ireland.
The negative effect was more pronounced in countries that have higher levels of uncertainty avoidance (e.g., Belgium, Portugal and Greece), higher power distance (e.g., Croatia, Romania and Slovenia) and higher long-term orientations (e.g., Belgium, Germany and Lithuania).
Dau says the research has implications for both companies and policymakers.
"Managers can leverage these cultural dimensions to position AI initiatives in countries that minimize regulatory constraints and enhance innovation potential," Dau says. "Policymakers need to consider the advantages and disadvantages of stringent data protection regulations."
"We are not suggesting that GDPR is detrimental and it can be critical for consumer protection," Dau continues, "but it is important to understand its full range of effects."
More information: Hyungseok David Yoon et al, Privacy protection laws, national culture, and artificial intelligence innovation around the world, Journal of International Business Studies (2025). DOI: 10.1057/s41267-025-00790-2
Provided by Northeastern University
This story is republished courtesy of Northeastern Global News news.northeastern.edu.
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