Digital Trade Networks: Multinational Enterprises and Digital Regulation

Abstract

Abstract The influence of multinational enterprises on digital trade is growing significantly, resulting in profound transformations within global production networks. In this paper, we establish a comprehensive global digital trade network using the OECD-AMNE database and conduct empirical analysis to examine the impact of digital regulations and network structure. Our findings reveal domestic and international digital regulations' collaborative influence on countries' network participation. Moreover, we observe that stringent domestic restrictions impede exports. Additionally, our results highlight the positive role of reciprocal network structures in fostering trade relationships. By employing a value-added decomposition approach, we uncover that digital service trade restrictions hinder the export of value-added trade when multinational enterprises act as upstream value-added providers. However, downstream producers experience comparatively lesser impact. Furthermore, we identify that disparities in digital service regulation between home and host countries significantly influence the digital service output of multinational enterprises. Additionally, differences in global rules have implications for investment relationships. To sum up, we have put forward policy suggestions that are specifically designed for the newly adopted digital commerce systems. These suggestions highlight the significance of maintaining harmony between digital accessibility and safeguarding the country's economic interests. JEL Classification: F14; F42;