Data as Capital: Legal Ownership, Privacy, and Competitive Advantage in Digital Entrepreneurship

data economy; data ownership; privacy regulation; competitive advantage; digital entrepreneurship; intangible assets; data minimisation; market concentration

Data is often called capital, an asset and even one of a firm's possessions. This paper proposes that all three explanations are wrong in relevant respects that impact the creation, funding and regulation of digital ventures. The four defining attributes of a capital asset non-rival, excludable, separable, transferable are missing from data: it is not excludable, it is not separably valuable, it is not transferable, it is not owned, but held as a set of adjacent and revocable entitlements. It also has no conventional asset has – that is, it has liability proportional to its size and sensitivity. Derived from this we create two constructs. The first is the returns of “contingent control rents” which occur not in the act of ownership but rather in the act of control, which exists only as long as consent, access and regulatory permission exist, all of which are subject to cancellation by those other than the owner. The second is the data holding problem where optimal holdings are interior to maximal holdings due to the saturation of the marginal predictive value and the increase of the marginal liability, which provides a self-interested, even if not only the ethical argument for data minimisation. We then go on to distinguish four types of data advantage and make the case that there are only two types that are defensible for entrants, and explore the now extensive evidence that the presence of consent-based privacy regimes has a salience effect which is more likely to favor incumbents than to be driven by compliance costs. There are seven propositions also provided, and an analytical protocol. No "made up" numbers are presented.