Investigating the impact of ICT-trade nexus on competitiveness in Eastern and Western European countries

Purpose: Since competitiveness is crucial in international trade, this paper contributes to the literature by interrogating the information and communication technology (ICT)-trade nexus on competitiveness in Eastern and Western European countries. Does ICT usage promote or hinder the impact of trade openness on competitiveness? This study attempts to answer two questions: (1) is the interaction of trade and ICT significant in promoting competitiveness? (2) Is the effect significantly different by European classification? Design/methodology/approach: With data on 17 European countries from 2007 to 2020 and using mobile phones and fixed telephone usage as ICT indicators, the study engages the bootstrapped ordinary least squares (BOLS) and method of moments quantile regression (MM-QR) techniques to probe the discourse. Findings: The empirical findings reveal that (1) the interaction of trade and ICT boost competitiveness; (2) the effect of mobile phone is consistent across the full, East, and West European samples; (3) the interaction effect is also significant across the conditional distribution of competitiveness and (4) mobile phones and fixed broadband usage reveal “leapfrog” effect across the quantiles. Overall, the study submits that ICT usage will enhance the impact of trade, and thus, ICT is a critical enabler of competitiveness in Europe; policy recommendations were discussed. Originality/value: To the best of the authors' knowledge, this is the first study examining the interaction effect of trade openness and ICT usage on competitiveness in Europe. In other words, the authors attempt to analyze how ICT usage influences trade-competitiveness dynamics. To fill the gap in the literature, the authors' use a sample of 17 European countries from 2007 to 2020. The variables of interest are the competitiveness index, trade openness, and four ICT indicators (mobile phone, fixed telephone subscriptions, fixed telephone subscriptions, and Internet users).