Transnational Data Flow Constraints: A New Challenge for Multinational Corporations
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Abstract.Thisarticleexaminesthe implicationsof transnationaldata flowconstraintsfor across nationalboundariesinternational business.Theneed fora freeflowof information facilitatinginternationalbusiness and reducingcosts for multinationalcorporations-is dataconstraints, discussed.Althoughbothlargeandsmallfirmsareaffectedbytransnational companiesthat are managedin a decentralizedfashionare affectedto a lesser degree. dataflow Economicprotectionism has emergedas a majorreasonforregulatingtransnational by nationstates. * During the decade of the 70s, an increasing number of firms with international INTRODUCTION operations sought to update and automate the flow of informationbetween their subsidiaries and their corporate headquarters. As multinational companies (MNCs) modernized their telecommunications infrastructure, they found that informationcan be stored, processed, retrieved, and used in decision making and policy formulation more efficiently (that is, faster and less expensively) if their computers were allowed to communicate with one another in a network across national boundaries. Although this trend has increased corporate efficiency by improvingcommunications, record keeping, planning, strategy, and control, it has also increased certain risks for MNCs.These risks are twofold: 1) increasing levels of governmental control associated with transnational (or transborder) exchange or transmission of data, and 2) risks involved in data privacy, piracy, or loss. This article examines the risks and the problems associated with transnational data flows (TDF)and their implications for the MNCs. Fromthe viewpoint of MNCs, free flow of informationacross nationalboundaries is a necessary part of corporate communications structure. In fact, it has been suggested that managing internationalinformationflows in a MNCis as important as managing the company's assets or its production.1 Given the importance of such information,the privacy issue in TDF is a major concern for MNCs. Nation states, on the other hand, are concerned largely with issues relating to national security, economic protectionism, and to a lesser degree cultural independence. Several governments, mostly in the industrialized world, have passed laws providing privacy protection for all "legal" persons (including firms) while concurrently limitingthe ability of firms to plan for an efficient intracorporate data flow. Over 60 countries are either considering or have passed legislation that directly or indirectly affects TDF. Among these, 25 countries have legislation under review that will directly affect transnational data flows. In addition, legislation containing transnational data flow constraints already exists in: Australia, Austria (1978), Brazil, Denmark (1978), Finland, France (1978), Germany (1977), Japan, Luxembourg (1979), Norway (1978), and Sweden (1973). Canada and the United States have privacy laws, but neither one has transnational provisions. Canada already has a TDF law that affects the flow of international banking data. In addition, Canada i
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