Does language matter to foreign subsidiary performance?

Konara, Palitha and Wei, Yingqi (2020) Does language matter to foreign subsidiary performance? International Marketing Review. ISSN 0265-1335

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This paper examines the role of language in foreign subsidiary performance.

We develop hypotheses relating to the effects of language difference and its interplay with cultural distance and market size. Considering languages that can be directly used and that can be acquired by MNEs, we employ language variables representing major languages and a population of 60 home and 57 host countries to study the performance of a sample of 1,751 subsidiaries between 2002 and 2013.

Language difference is found to have a negative impact on subsidiary performance. The positive effects of cultural distance on performance become stronger when the language difference is smaller. The language effects are also more pronounced in small markets.

Practical implications
This study reveals that subsidiary success depends on language difference, and such effects are more pronounced in small markets. The results also suggest that MNEs need to give more attention to bridging language barriers when they invest in culturally distant countries so that they can benefit from the positive effects of cultural distance.

Given that there is no systematic research investigating the role of language in the foreign subsidiary performance of MNEs, we make an important contribution by presenting a quantitative investigation of the language–performance relationship. The novelty of the paper also lies in examining the interplay of language difference with cultural distance and market size.

Item Type: Article
Keywords: language, foreign subsidiary performance, language difference, cultural distance, market size
Schools and Departments: University of Sussex Business School > Strategy and Marketing
Research Centres and Groups: International Business
Subjects: H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation > HG4538 Foreign investments
P Language and Literature > P Philology. Linguistics > P0101 Language. Linguistic theory. Comparative grammar > P0121 Science of Language (Linguistics)
Depositing User: Palitha Konara
Date Deposited: 02 Jun 2020 08:22
Last Modified: 11 Aug 2020 11:15

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