The role of language connectedness in reducing home bias in trade, investment, information, and people flows

Konara, Palitha (2020) The role of language connectedness in reducing home bias in trade, investment, information, and people flows. Research in International Business and Finance. a101180. ISSN 0275-5319

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Abstract

This study introduces the concept of a country’s language connectedness (LC), namely, the extent to which the country is connected to the rest of the world in terms of the number of potential communicative partners. LC depends on the extent to which the country’s languages are spoken outside that country. Operationalizing and constructing an index capturing LC, I empirically show that a country’s LC is strongly associated with its globalization level. This effect is particularly strong in cross-border trade and investment and information flows. I also find that countries with languages belonging to large linguistic families (i.e., countries with greater linguistic connectedness) are more globalized. This study presents language barriers as a key contributor to home bias, that is, the tendency toward more within-border than cross-border interactions.

Item Type: Article
Keywords: language; globalization; home bias; economic integration; linguistic distance
Schools and Departments: School of Business, Management and Economics > Strategy and Marketing
Subjects: H Social Sciences > HF Commerce > HF1371 International trade
H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation > HG4538 Foreign investments
Depositing User: Palitha Konara
Date Deposited: 21 Jan 2020 09:56
Last Modified: 21 Jan 2020 10:00
URI: http://sro.sussex.ac.uk/id/eprint/89449

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