Enhancing the Sustainable Development of the ASEAN's Digital Trade: The Impact Mechanism of Innovation Capability

Digital trade, as an emerging and transformative trade model in the digital era, has significantly altered global trade methods, products, services, and regulatory frameworks. This study investigates the impact mechanism of innovation capability on the sustainability of the ASEAN's digital trade, emphasizing how technological advancements contribute to sustainable economic growth and digital resilience. Utilizing panel data from nine ASEAN countries between 2007 and 2021, this research explores how innovation capability fosters digital trade development by reducing the digital divide and promoting equitable access to digital markets. Findings highlight the substantial disparities in digital trade and innovation capacity across the ASEAN, with innovation capability playing a pivotal role in driving trade practices. This study reveals that digital readiness mediates the relationship between innovation capability and digital trade, while the RCA index serves as a moderating factor enhancing digital trade competitiveness. Furthermore, this study underscores that effective governance, regulatory quality, foreign direct investment (FDI), and a balanced wage-output ratio in the digital industry positively influence digital trade, whereas corruption and inadequate discourse power hinder it. The findings provide valuable policy recommendations for ASEAN countries to develop sustainable digital trade policies, strengthen innovation ecosystems, and bridge the digital divide, thereby contributing to the broader agenda of sustainable development.