Learning and Information Transmission within Multinational Corporations

Exports, trade costs and FDI entry: evidence from Japanese firms

“…Conconi et al (2016) findings for Belgian firms showed the same pattern -export experience decreases uncertainty and increases the probability of FDI. In this regard our work also complements Chen et al (2021), which emphasized the learning-by-exporting mechanism using the same data as we use. Trade costs, however, decrease the probability of FDI entry.…”

“…They find that older, larger, and more productive and more human capital-intensive Belgian service producers are more likely to serve foreign markets through FDI rather than exports. Chen et al (2021) use one of the two Japanese firm-level data sets that we use in this paper (the Basic Survey on Overseas Business Activities) and show that large exports of Japanese affiliates to third markets increase the probability of the parent firms investing in these markets. Thus, like this paper, Chen et al (2021) highlight the learning-by-exporting channel.…”

“…Chen et al (2021) use one of the two Japanese firm-level data sets that we use in this paper (the Basic Survey on Overseas Business Activities) and show that large exports of Japanese affiliates to third markets increase the probability of the parent firms investing in these markets. Thus, like this paper, Chen et al (2021) highlight the learning-by-exporting channel. This paper complements Chen et al ( 2021) by exploiting a richer set of data and focusing on the export experience of parent firms rather than that of their affiliates.…”

Cross‐border networks and knowledge spillovers for foreign entry

“…For example, the positive correlation of profits across destinations implies a path-dependent pattern of sequential entry by exporters into foreign markets (Albornoz et al, 2012). 4 Chen et al (2022) show a similar driving force of information transmission for multinationals' market entry decisions. In particular, cross-market learning occurs as positive signals from affiliates' past sales in prior destinations impact the probability of entry by FDI into a potential destination.…”

Sequential Exporting Across Countries and Products

“…Inspired by pioneering work by Evenett and Venables (2002) and Eaton, Eslava, Kugler, and Tybout (2008), ACCO developed and tested the notion of export experience and profit correlation across destinations as a way to learn profitability in multiple destinations. This mechanism has been adapted and extended both to explain facts on export dynamic patterns in specific contexts (as, for example, the international releases of U.S. movies, studied by Holloway, 2017) and to explain the process of firm internationalization more generally, as in Egger, Fahn, Merlo, and Wamser (2014), Conconi, Sapir, and Zanardi (2016), Chen, Senga, Sun, and Zhang (2018), Chen, Sun, and Zhang (2020), and Berlingieri, Marcolin, and Ornelas (2021). While this body of work has shown evidence of the core mechanism based on firms learning their own profitability abroad as they engage in exporting, none has integrated the product and destination dimensions in a single framework, as we do here.…”