Learning and Information Transmission within Multinational Corporations

Cheng Chen, Chang Sun and Hongyong Zhang

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We propose that multinational firms learn about their profitability in a particular market by observing their performance in nearby markets. We first develop a model of firm expectations formation with noisy signals from multiple markets and derive predictions on expectations formation and market entries. Using a dataset of Japanese multinational corporations that includes sales expectations of each affiliate, we provide evidence supporting the model's predictions. We find that a positive signal about demand inferred from nearby markets raises the probability of entry into a new market, or raises the firm's sales expectation in an existing (focal) market. The latter effect is stronger when (1) the firm is less experienced in the focal market (2) the signals from the focal market are noisier and (3) the firm is more experienced in markets where signals are extracted.

Pages: 61 pages
Date: 2019-07
New Economics Papers: this item is included in nep-cse and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/19e053.pdf (application/pdf)

Related works:
Journal Article: Learning and information transmission within multinational corporations (2022)
Working Paper: Learning and Information Transmission within Multinational Corporations (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:19053

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().