Effects of Digital Regulations on International Business Strategy A multi-case study by Laurin Fahrnberger Willian Trindade Leite May 2021 Bachelor’s Programme in International Business Supervisor: Sotaro Shibayama Abstract Digital technologies have brought new challenges to society, such as data privacy abuses, attacks on democracy, and even military-grade technologies being accessed by civilians. Europe has taken the leadership by regulating different aspects of the digital economy; however, these regulations may create distortions that will harm European businesses. This study tries to draw a picture of the different types of regulations introduced in the digital economy and the potential effects on how international firms strategize. To aid in this analysis, eight cases, comprising seven companies and one trade association, bring a first-person insight into how digital regulations work today and how much it has affected their strategy. The studied companies are international and primarily European, but the digital technologies they use in their business models vary greatly. The existing theory tries to explain the general effects of regulation on aspects of strategy but seldomly takes a broader approach. This dissertation studies the broader impacts of regulations on international business strategy, mostly in what concerns how the products are developed and adapted to each market or whether digital companies are more likely to pursue arbitrage. The analysis of each case is made using Ghemawat’s (2007) model for international business strategy and Rugman and Verbeke’s (1998 and 1998b) models for the effect of environmental regulations on business strategy. In most cases, one particular trend indicates that digital companies that find regulations complementary to their business strategies tend to follow an AA strategy comprising aggregation and adaptation. Furthermore, a collection of strategies on how to deal with the national-international regulatory challenge is also offered. Keywords: international business strategy, digital economy, digital regulation, institution- based view, resource-based view i Acknowledgements First and foremost, we would like to thank all the companies and executives that devoted some of their time to this study. This dissertation would not have been possible without your effort, and working with you has been more interesting than we could ever imagine. Your experience and views have genuinely enriched our understanding of this topic. Gratitude is also due to our supervisor, Sotaro Shibayama, who has been patient and helpful on every occasion we discussed this work. Your insights and feedback have guided us through this very challenging task. Your supervision has in many ways inspired and motivated us throughout the whole process, and for that, we are genuinely grateful. We would also thank the everlasting support of the many friends without whom this study would not have the same quality. Lee Strandberg and Arseni Ivanov have been crucial for making our data collection possible. Their invaluable feedback has pushed this work forward countless times. Lastly, we are incredibly thankful to our families for the continuous support and motivation. You have been an endless source of inspiration throughout these years. Although separated by such great distances, your affection, and care challenge any concept of space. Thank you for all the support. ii Table of Contents 1 Introduction ...................................................................................................................... 1 1.1 Background ................................................................................................................ 1 1.2 Aim and Objectives .................................................................................................... 2 1.3 Delimitations .............................................................................................................. 4 1.4 Outline of the Thesis .................................................................................................. 4 2 Literature/Theoretical Review ........................................................................................ 5 2.1 Digital Economy ........................................................................................................ 5 2.1.1 The importance of the global digital economy ....................................................... 6 2.1.2 Types of digital business ........................................................................................ 6 2.2 International Business Strategy .................................................................................. 7 2.2.1 Defining Business Strategy .................................................................................... 7 2.2.2 An institution-based view for the global digital economy ..................................... 7 2.2.3 International Business Strategy in the Digital Economy ....................................... 9 2.2.4 Ghemawat’s model for managing differences ..................................................... 10 2.3 Regulation ................................................................................................................ 11 2.3.1 Regulation in the Digital Economy ...................................................................... 12 2.3.2 Regulation and International Business Strategy ................................................... 13 2.3.3 Regulation and International Business Strategy in the Digital Economy ............ 14 3 Methodology ................................................................................................................... 16 3.1 Research Approach .................................................................................................. 16 3.2 Research Design ....................................................................................................... 17 3.3 Data Collection Method ........................................................................................... 17 3.3.1 Sampling ............................................................................................................... 18 3.3.2 Interview method .................................................................................................. 20 3.4 Data Analysis ........................................................................................................... 21 3.5 Validity ..................................................................................................................... 22 3.6 Reliability ................................................................................................................. 24 3.7 Limitations ............................................................................................................... 24 4 Analysis and Discussion ................................................................................................. 26 4.1 Results and Analysis ................................................................................................ 26 4.1.1 Advagym Solutions .............................................................................................. 27 4.1.2 Chainvine ............................................................................................................. 29 4.1.3 DIGITALEUROPE .............................................................................................. 31 iii 4.1.4 hiveonline ............................................................................................................. 32 4.1.5 Simplygon ............................................................................................................ 34 4.1.6 Smint.io ................................................................................................................ 35 4.1.7 Tubics ................................................................................................................... 37 4.1.8 Veeva Systems ..................................................................................................... 39 4.2 Discussion ................................................................................................................ 41 5 Conclusion ....................................................................................................................... 48 5.1 Research Aims & Objectives ................................................................................... 48 5.1.1 Findings ................................................................................................................ 49 5.2 Practical Implications ............................................................................................... 51 5.3 Future Research ........................................................................................................ 51 References ............................................................................................................................... 52 Appendix A ............................................................................................................................. 60 1. The interview guide (general) ...................................................................................... 61 2. The interview guide (on-premises software companies) .............................................. 63 3. The interview guide (trade association) ....................................................................... 64 4. Applying the AAA framework ....................................................................................