Determinants of Global IT and ITES Exports: A Panel Data Analysis of Economic, Institutional, and Technological Factors

Abstract

The determinants of Information Technology (IT) and Information Technology Enabled Services (ITES) exports are investigated through panel data analysis of 34 countries spanning 2000-2023. The Hausman specification test results (χ²=109.6, p=0.000), supports the use of fixed effects estimation. The econometric results identify driving factors in the expanding IT and ITES exports sector. The estimated model indicates that GDP per capita, foreign direct investment inflows, telecommunications infrastructure, human capital development, political stability, and research and development expenditure exert a substantial impact on IT and ITES export volumes. A one percentage point increase in GDP per capita correlates with a 2.2 per cent expansion in IT and ITES exports, while an equivalent improvement in human capital and R&D expenditure generate 0.53 per cent and 0.55 per cent increases respectively. Suggesting specialization patterns within global value chains, IT goods exports exhibit an inverse relationship with IT service exports, contrary to conventional intuition. Additionally, the real effective exchange rate exerts no statistically significant influence, implying the predominant role of non-price factors in driving competitiveness in this sector. The above empirical findings provide valuable policy insights to design strategies to enhance participation in the rapidly expanding global IT and ITES trade. Designing such strategic policies is particularly instrumental for developing economies seeking to diversify their exports with knowledge-intensive services.