Language friction and partner selection in cross-border R&D alliance formation

Abstract

How does language friction affect alliance formation? Language friction is a form of cultural friction arising from structural differences in the respective languages used by potential partners to reason and solve problems together. A little language friction may prompt partners to rethink solutions, thereby enhancing collaboration, but excessive friction may impede collaboration. We develop a Language Friction Index (LFI) to quantify relative differences in linguistic structure for any language pair. Utilizing a unique data set of semiconductor design activities (1988)(1989)(1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001), our empirical analysis finds an inverted U-shaped relationship between partners' LFI and the likelihood of cross-border research and development (R&D) alliance formation. This relationship is further moderated by prior ties and technological distance. Our findings have several important implications, including: (1) language differences are a measurable and discernible source of cultural friction; (2) the effects of language friction are economically significant and strategically consequential; (3) certain aspects of language friction occur independent of language proficiency and persist despite the use of lingua franca to reduce language barriers; (4) linguistic diversity is an indirect marker of cognitive diversity, which is useful in boosting creativity, especially in first-time collaborations; (5) beyond R&D alliances, language friction may also influence other types of strategic interactions and organizational processes.

On the future of international joint venture research

“…From isolated, sequential action to interdependencies and concurrent decisions The prevalent conception is to model the creation, formation, governance, and possible dissolution of a single IJV within a sequence of pre-determined stages (Beamish & Lupton, 2009;Kale & Singh, 2009;Joshi & Lahiri, 2015) rather than to consider them as interdependent and contingent upon specific factors. This is most evident in the wellknown IJV life cycle, which portrays such decisions as playing out in a linear and orderly way, but this need not be the case (Reuer, 2000); for instance, stages might be skipped or go in different sequences.…”

Subsidiary staffing, cultural friction, and subsidiary performance: Evidence from Korean subsidiaries in 63 countries

“…Language plays an important role in different aspects of international operations, including in terms of communication, training programs, and staffing decisions (Joshi & Lahiri, 2015;Luo & Shenkar, 2006;Tietze, 2008). Welch and Welch (2015) argued that MNEs are essentially multilingual entities, and developing the capability to deal with different languages is a major challenge.…”

“…PCNs tend to prefer using corporate language at subsidiaries (Peltokorpi & Vaara, 2012). A common language helps in understanding the host country culture and norms, developing a rapport with the HCNs, and increasing communication effectiveness between the parent and its subsidiaries (Contractor, Yang, & Gaur, 2016;Joshi & Lahiri, 2015). However, when PCNs and HCNs come from different cultures, the HCNs may not view the imposition of a common language positively.…”

Language in International Business: A Review and Agenda for Future Research

“…Firm-level research focuses on language competencies, policies, and practices within MNCs (e.g., Harzing and Pudelko 2013), including HQ-subsidiary relationships (Harzing et al 2011;Harzing and Pudelko 2014) and mergers, acquisitions, and alliances (Joshi and Lahiri 2014;Cuypers et al 2015). These studies investigate the impact of linguistic diversity on social identity formation (e.g.…”