Varieties of Capitalism and Regulatory Approaches to an Emerging Data Economy

Dr. Pascal König

With the proliferation of fine-grained information about the social world, data-based value creation is becoming a major business activity in the digital age. The European Union (EU) has coined the term data economy to refer to activities of economic value creation that are based on data as a core resource. It has depicted it as a major driver of a larger digital transformation and the European Commission has even declared it the “bedrock of the future economy”.
With data being its raw material, value creation in the data economy is in large part based on using information about individuals and it involves processes that shape individuals’ information environments. This leads to, important regulatory challenges as it introduces major trade-offs between policy goals. On the one hand, fostering the data economy means having to fulfil certain key requirements, such as guaranteeing the availability of data. On the other hand, meeting such requirements may come into conflict with fundamental norms of liberal democracies. The ubiquitous collection and processing of data, for instance, may hurt informational autonomy, and opaque and unaccountable uses of data-driven algorithmic decision-making as part of data-based value creation may lead to discriminatory impacts and harm personal autonomy.
Against this backdrop, the paper examines how policy actors deal with these trade-offs. What regulatory approaches do they adopt for an emerging data economy? Drawing on the Varieties of Capitalism framework, the paper argues that this depends on the degree to which market-based coordination prevails in an economy. Specifically, it posits that a greater emphasis on the market translates into a greater role of individual responsibility in regulation. The paper examines this argument based on a comparison of Germany and the United Kingdom. Starting from the literature on data-based business models, it formulates key requirements of the data economy and identifies trade-offs with other policy goals. Through studying relevant policy documents from the last decade, the analysis carves out governments’ regulatory approaches and determines (a) how much weight is given to different regulatory aspects and (b) which policy instruments are favored.