What hinders digital communication? Evidence from foreign firms in Japan

Abstract

Digital technology such as virtual meetings is key to communication and collaboration. However, a firm-level survey in Japan during the COVID-19 pandemic shows that foreign firms regarded digital communication as a key business obstacle. This paper estimates the determinants of the likelihood that foreign firms regard digital communication as an obstacle. The results show that digital communication is hindered by language differences, employees’ nationality differences, employment size, and time differences from foreign headquarters. Contrary to common assertions, digital communication is regarded as an obstacle in remote-work feasible sectors, but not so in in-person service sectors. Thus, digital communication does not completely eliminate barriers to face-to-face communication.