Personal Data Protection as a Determinant of Digital Business Sustainability: A Business Value-Based Approach and Customer Trust

Abstract

Personal data protection has predominantly been viewed by business practitioners as an onerous compliance cost restricting commercial flexibility. This study challenges this narrow view by framing personal data protection as a strategic dynamic capability (Privacy-as-Business-Value) essential for digital business sustainability. This research analyzes the impact of proactive data protection practices on digital business sustainability, evaluating the parallel mediating mechanisms of corporate digital reputation and customer trust. Employing an explanatory survey, empirical data were gathered from 220 founders, executive directors, and operations managers of digital startups and tech-enabled SMEs across Indonesia. Data were evaluated via Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4.0. Findings reveal that: (1) personal data protection positively and significantly enhances corporate digital reputation (β = 0.518; p < 0.001), customer trust (β = 0.476; p < 0.001), and digital business sustainability (β = 0.224; p < 0.001); (2) digital reputation (β = 0.392; p < 0.001) and customer trust (β = 0.425; p < 0.001) substantially drive digital business sustainability; and (3) digital reputation (indirect effect β = 0.203; p < 0.001) and customer trust (indirect effect β = 0.202; p < 0.001) significantly mediate the relationship between data protection and business sustainability. The framework explains 66.8% of the variance in digital business sustainability (R² = 0.668). These findings advance Resource-Based View and Stakeholder Theory, proving that privacy stewardship constitutes a high-return strategic investment rather than a mere regulatory overhead.