European Data Regulation and Digital Innovation: A Case of a Smart City Digital Platform

Abstract

The emergence of data-based economy is in the interest of the industry, academia and authorities. The EU has established several regulations and implementation initiatives to support and control a novel type of European data economy. This differs from concurrent data markets dominated by existing platform giants like Alphabet, Meta and Microsoft, whose market dominance creates negative externalities such as concentrated market power and customer lock-in. There is a need for more interdisciplinary studies based on empirical findings examining how the regulatory actions taken for the European data economy may affect digital innovation and the negative impacts associated with concurrent digital platforms. Our objective is to explore mechanisms affecting the impact that regulatory actions may have on digital innovation. More specifically, we research these mechanisms in an explorative case study in the context of development of a digital data marketplace within the smart city domain. We use action research methods supplementing digital platform and ecosystem research with legal reflection. Based on the learnings from our research, we identify regulatory enablers from two core regulations of the emerging European data economy, namely the Data Governance Act and the Data Act and explore how they support value creation opportunities. We propose empirical and managerial insights for data ecosystem actors and contribute to the research by creating more understanding of innovation activities and value creation related to digital data platforms, as well as related roles and mechanisms affecting the interplay of regulations and digital innovation.