What Hinders Digital Communication? Evidence from Foreign Firms in Japan

Digital technology such as virtual meetings is key to communication and collaboration for multinational firms, but it is unclear what hinders their digital communication. This paper estimates barriers to digital communication by using a firm-level survey on foreign firms in Japan that faced an exogenous shock to adopt digital technology for communication extensively during the COVID-19 pandemic. Efficient communication depends on existing barriers to internal communication in firm organization and external communication with clients and customers. The results show that foreign firms perceive a greater issue of digital communication in both internal and external communication channels. Contrary to common assertions, digital communication is perceived as a greater issue in remote-work feasible sectors. Thus, digital technology does not eliminate existing barriers to face-to-face communication.