Data governance and regulation in emerging markets: An empirical firm-level analysis in Ecuador

Abstract

The enactment of data protection laws in emerging markets presents a duality: while they aim to foster trust, they impose significant compliance burdens on SMEs. This study empirically evaluates the relationship between the perceived regulatory environment, digitalization, and firm performance in Ecuador. Using data from 345 firms from the World Bank Enterprise Survey, a sequential methodological approach was employed. First, a "Perceived Regulatory Environment" (PRE) construct was validated using Confirmatory Factor Analysis. Second, a mediation model with SEM was tested, which was refuted by the data due to an improper solution. Finally, multiple regression models were run to analyze direct effects. The results show that while the PRE construct is robust and corruption is perceived as the most severe obstacle (52.3%), its direct impact on sales, productivity, or the adoption of a website is not statistically significant. Furthermore, an unexpected negative relationship was found between website ownership and performance, a finding consistent with the "IT productivity paradox". It is concluded that the impact of regulation is non-linear and mediated by more complex contextual factors, underscoring the importance of strengthening the rule of law beyond the mere enactment of legislation.