The determinants of export sophistication: Does digitalization matter?

Abstract

Due to innovation, productivity surged and the structure of exports shifted towards sophisticated products in recent decades. In this study, I analyse the determinants of export sophistication with a special focus on the effects of digitalization for 61 countries by employing three measures of export sophistication. To my knowledge, this is the first study that investigates the nexus between digitalization and sophistication. It is found that exports get more sophisticated as digitalization promotes. In line with the literature, institutional quality, access to credit, and R&D are concluded to be other drivers of export sophistication. However, the evidence on tertiary enrolment and FDIs is mixed. Finally, the level of democracy seems to have a limited effect on sophistication indicating countries that have an autocratic rule also have a chance to sophisticate their exports. In the light of these findings, governments are advised to improve property rights, rule of law, the ease of doing business, access to credit, tertiary enrolment, and R&D expenditures to sophisticate their export baskets.

Does infrastructural development foster export upgrading in Africa?

“…Atasoy (2020) discusses the effect of digitalization on three measures of export sophistication and finds that exports become more sophisticated as digitalization increases. This result is corroborated by Lapatinas (2019), who also shows that internet access favors exports of sophisticated products.…”

Export Technological Sophistication of China: Measurement and Impact Factor

“…Zhang and Chen [13] pointed out that outward foreign direct investment (OFDI) only had a positive impact on export sophistication in the developed coastal region. However, there may exist a nonlinear effect from FDI on export sophistication exhibiting diminishing returns [14,15].…”

“…As for the institutional factors, Rehman et al [16] employed a robust dynamically simulated autoregressive distributed (DYS-ARDL) dynamic method and found that better infrastructure will be more beneficial for Chinese export sophistication and diversification. Atasoy [14] studied the positive effect of digitalization on export sophistication. Gan and Cheng [17] found that the exchange rate reform changed the effect of the RMB exchange rate on export complexity from significantly negative to significantly positive.…”

Does information and communication technologies affect economic complexity?

“…The author shows that better access to the internet, through its positive effects on the level of innovation, merchandise exports, and foreign direct investment (FDI) inflows, improve the diversification of service exports. We have to wait for the study of Atasoy ( 2021 ) to review a study that analyses, among other things, the role of the internet in economic complexity. He finds that exports become more sophisticated as digitalisation progresses.…”

“…This study differs from previous studies and contributes to this emerging literature by making at least three novel contributions to knowledge. First, previous studies directly related to this study, namely Lapatinas ( 2019 ) and Atasoy ( 2021 ), analyse the average effects of ICT measured for the internet on economic complexity. This study goes beyond an average effect by examining for the first time the long-term effect of ICT on economic complexity.…”