This paper investigates whether investments in data influence firms’ R&D and whether the two are productivity-enhancing complements. We conceptualise and test whether investments in data reduce market uncertainty, thereby mitigating the inherent uncertainty of R&D and enhancing research and innovation investment. Using Italian firm-level data from 2002 to 2024 and exploiting the GDPR as an instrument, we identify a positive causal effect of data on R&D investment. Moreover, we find that data and R&D are complementary in enhancing both short- and long-term productivity. Our analyses also identify a positive role of R&D for productivity only when firms are data-intensive.

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