Does data privacy regulation affect corporate innovation? Evidence from China’s personal information protection law

This paper examines the impact of China’s Personal Information Protection Law (PIPL) on corporate innovation. Exploiting the PIPL’s implementation in November 2021 as a quasi-natural experiment, we apply a difference-in-differences framework with Poisson Pseudo-Maximum Likelihood estimation to A-share listed firms over 2016–2025. The PIPL significantly reduced patent applications among data-intensive firms, with the negative effect persisting throughout the post-policy period. Our mechanism analyses point to several channels. Consistent with the data-access mechanism, the decline is larger among firms with greater pre-policy exposure to data-intensive activities. The PIPL also increases compliance burdens, shortens corporate planning horizons, and tightens financing constraints. The effects are concentrated among large and non-state-owned firms. Our findings highlight the unintended innovation costs of data privacy regulation and the importance of transition-oriented policy design.