Learning and information transmission within multinational corporations
Chang Sun and
Hongyong Zhang ()
European Economic Review, 2022, vol. 143, issue C
Firms face substantial uncertainty when doing business in new markets. We propose that multinational firms use “cross-market learning” to resolve such uncertainties. We develop a model of firm-level expectations formation with noisy signals from multiple markets and derive predictions on market entries and expectations formation over the firm’s life cycle. Using a novel dataset of Japanese multinational corporations that includes sales expectations of each affiliate, we provide supportive evidence for the model’s predictions. We find that firms rely on their performance in nearby markets to predict their profitability in a new market and make entry decisions. Such “cross-market” learning is less important after the firm has accumulated experience in the new market, but becomes more important if the uncertainty of the focal market is high or the firm has received more signals from the nearby markets.
Keywords: Learning; Expectations formation; Multinational production (search for similar items in EconPapers)
JEL-codes: D83 F2 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Learning and Information Transmission within Multinational Corporations (2020)
Working Paper: Learning and Information Transmission within Multinational Corporations (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:143:y:2022:i:c:s0014292121002841
Access Statistics for this article
European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer
More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().