Digital Distance And Trade Dynamics: Threshold Effects On Turkiye’s Export Performance

Abstract

This study investigates whether digital distance—defined as disparities in digital and technological capabilities between countries—constitutes a critical determinant of Turkey’s export performance in the evolving architecture of international trade. Moving beyond traditional gravity-based explanations centered on geographical distance, the article develops a multidimensional digital distance index derived from the Frontier Technological Readiness Index (FTRI) and the Economic Complexity Index (ECI). Using annual panel data for 108 trading partners over the period 2008–2022, the analysis integrates GDP and exchange-rate controls within a panel threshold regression framework, complemented by panel causality tests. The findings reveal a statistically significant single-threshold structure, demonstrating that digital distance exerts nonlinear and asymmetric effects on Turkey’s exports. While convergence in ICT infrastructure and financial access tends to enhance export performance, narrowing gaps in certain dimensions—particularly skills and R&D—does not uniformly yield positive trade outcomes. In fact, larger disparities in selected technological capabilities may generate temporary competitive advantages, consistent with technology-gap theory. Robustness checks incorporating economic complexity distance confirm these threshold dynamics. Moreover, causality results indicate predominantly bidirectional relationships between exports and digital dimensions, underscoring mutual reinforcement between trade and digital transformation. Overall, the results challenge the presumption that digital of selective digital specialization and innovation-driven competitiveness. By conceptualizing and empirically validating digital distance as a structural trade determinant, the study contributes to the emerging literature on digitalization and international trade and offers policy insights for adaptive, data-driven export strategies in an era of technological disruption.