The purpose of this study is to ascertain if and how organizations are affected by the legal context in which they carry out their business. We develop a model which takes into consideration the macro environment, the competitive environment, and the focal firm. In the macro environment, we analyze country characteristics and, in particular, we examine differences between civil law and common law systems. In the competitive environment, we focus on the differences between centralized vs decentralized regulatory systems by analyzing and comparing legal cases as to how Europe and the U.S. enforce privacy regulations differently. Finally, we focus on the focal firm with respect to the differences in business behaviors taken by organizations in the European Union and the United States with reference to IT innovation and the development of new information and communication technologies. The results of this study offer significant insights from a theory, practice, and regulatory perspective.