The Influence of Digital Innovation Capability and Institutional Quality on Aviation Activities: Empirical Evidence of Threshold Effects Across Nations

This study examines how trade openness, institutional quality, digital innovation capability, and economic growth are associated with aviation activities across a balanced panel of 72 countries from 2005 to 2023. Air passenger transport carried (ATPC) and air freight transport carried (ATFR) are analyzed separately to capture possible structural differences. The empirical procedure includes descriptive statistics, diagnostic tests, Fisher-type ADF unit root tests, Westerlund cointegration tests, and two-way fixed-effects regressions with Driscoll-Kraay standard errors. Interaction and threshold models are further estimated to test whether the effect of trade openness varies across levels of digital innovation capability, and Dumitrescu-Hurlin causality tests are used to identify directional linkages. The results show that government effectiveness is a stable and positive determinant of both ATPC and ATFR. Aviation activities also respond differently to regulatory quality and the components of digital innovation capability. Passenger aviation is more closely associated with mobile connectivity, whereas freight aviation is more sensitive to institutional quality and broadband-based digital infrastructure. Threshold findings indicate a regime-dependent trade-aviation relationship shaped by digital capacity.