Volume 2 • Issue 1 • PP: 27-36 • 2025
Digital Economy and E-Commerce under Cross-Border Data Flows
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Given its rapid expansion and growing policy salience among global digital markets, we know considerably less about how these digital economy and e-commerce dynamics change during a regime of cross-border data flows. While previous research has emphasized the role of digital trade openness in shaping patterns of online market participation, limited attention has been given to how regulatory frictions in cross-border data transmission may be an underlying constraint to improve digital market integration. The aim of the study was to identify causal mechanisms for participation of different types of firms in e-commerce activities, their entry, use, intensity, and the resulting trade outcomes. In this paper, the analysis examines the determinants of cross-border digital engagement at the firm level, in combination with a comparative evaluation of digitally active and non-active enterprises. The empirical strategy of the study was structured by analyzing the selection bias of firms into e-commerce adoption, followed by some counterfactual estimations of the matched samples to produce unbiased treatment effects. An overview is provided of the econometric framework and identification strategy used for the estimation in the presence of non-random participation. The key variables with statistically significant effects in the matched estimations were digital connectivity and regulatory data openness, indicating that the likelihood of e-commerce participation would be easily amplified and sustained in a liberal and predictable cross-border data environment. Some evidence of the more heterogeneous and asymmetric relationships between firm characteristics and e-commerce outcomes is provided, and persistence of digital participation in the post-entry period is confirmed (average treatment effect; t = 2.87). Future research should include longitudinal datasets to test the stability of cross-border data flow effects for different stages of firm digitalization. These findings suggest that this line of empirical evidence provides credible guidance to policymakers in economies that require balanced digital trade regulation.
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