The rapid expansion of the digital economy is reshaping the global production and trade system, bringing new opportunities for developing economies seeking to enhance their international competitiveness, while also posing structural challenges. This study focuses on China, a typical emerging economy, and uses provincial panel data from 2015 to 2024 to empirically examine how digital transformation and technological innovation jointly affect foreign trade competitiveness. The core variables are measured as follows: The digitalization level is constructed using principal component analysis (PCA) based on three dimensions: digital infrastructure, digital industrialization, and industrial digitization; technological innovation is proxied by the logarithm of technology market transaction volume. This study employs a fixed-effects model with interaction terms to estimate the independent effects of digitalization and technological innovation and to explore their interaction within the framework of the digital economy. The empirical results show that both digital transformation and technological innovation have a significant positive impact on foreign trade competitiveness. Specifically, a 10-point increase in the digitalization index is associated with an approximately 0.10-unit increase in the trade competitiveness index, and a 1% increase in technological innovation input is associated with an increase of 0.032–0.042 units. However, their interaction coefficient is significantly negative (−0.001, p < 0.01), indicating a substitution effect: an increase in technological innovation investment weakens the marginal contribution of digitalization to export competitiveness, and vice versa. Further heterogeneity analysis shows that the direct effects of digital transformation and technological innovation are more significant in less developed regions, while the substitution effect is stronger in economically developed regions. The findings suggest that policies promoting digital transformation and technological innovation should avoid a uniform approach and instead adopt coordinated and phased strategies that are suitable for regional development conditions. By providing new empirical evidence on the interaction between digital economy development and innovation investment, this study enriches the existing literature and offers policy implications for emerging economies seeking to achieve sustainable foreign trade development under increasing global trade uncertainty.
Jiang et al. (Thu,) studied this question.