Cross-Border Communication and Private Participation Projects: The Role of Genealogical Language Distance.

Date01 Diciembre 2019
AuthorJimenez, Alfredo

1 Introduction

Cross-border communication plays an important role in many aspects of international business (Barner-Rasmussen et al. 2014; Felin et al. 2012). Difficulties to communicate between individuals from different countries can pose a challenge for the transfer of knowledge and, ultimately, the performance of the multinational corporation (Kuznetsov and Kuznetsova 2014; Liu et al. 2015).

Cross-border communication also plays a key role in entry mode decisions (Slangen 2011), leading us to posit that the role of language distance, a key component in cross-border communication, will play a role in investment decisions. The term "private participation projects" has been coined by the World Bank to refer to infrastructure projects which have been privatized and therefore companies, either domestic or foreign, participate as sponsors by holding some equity ownership of the project. Private participation projects are a "concession-oriented" (i.e., private sector is involved on a contractual basis and operates as "contractor") type of public private partnership, compared to other "organizational cooperation-oriented" projects in which there is a shared responsibility of public and private entities (Hodge and Greve 2007; Klijn et al. 2008).

Despite the long exclusion of Multinational Corporations (MNCs) from participation as investors in project privatization (Henisz et al. 2005), the last decades have seen a sharp reversal of this trend with a considerable increase of private ownership in infrastructure projects, with emerging economies making up the bulk of these projects (Jiang et al. 2015; Kania 1992; Ramamurti and Doh 2004). Previous literature on infrasuucture investment has studied several different host country characteristics, particularly government credibility (Ramamurti 2003), political stability (Jiang et al. 2015), policy reforms (Henisz et al. 2005), privatization method (Djankov 1999) and state ownership (Doh 2000; Doh et al. 2004; Inoue et al. 2013). To date, however, the role of genealogical language distance (GLD), a measurement of how closely related language are, has been largely neglected in these studies.

We believe that this lack of studies on language distance is problematic, as language can influence cross-border communication on many levels. Previous research has established that language use influences all layers of decision making in multinational companies (Barner-Rasmussen and Aarnio 2011; Marschan et al. 1997) but has also drawn attention to language use in foreign subsidiaries of MNCs as particularly crucial (Barner-Rasmussen and Bjorkman 2007; Peltokorpi and Vaara 2012). Besides, and despite the recent trend towards employing internally a common language in some MNCs (Neeley 2017; Neeley and Kaplan 2014), the large number of internal and external stakeholders such as employees, governments, banks, unions, and the local press (Gatti 2013) makes it unlikely that companies investing in private participation projects would not face at least some language difficulties in their interactions with some of these groups.

This situation of potential language difficulties influencing the private participation projects constitutes the main research gap that this paper attempts to address. Given the crucial role of potential language issues in cross-border communication (Barner-Rasmussen and Aarnio 2011; Marschan et al. 1997), we posit that it would be beneficial for companies to be able to predict to what extent language difficulties might arise in private participation projects. To address this research gap, we introduce the concept of GLD in order to analyze to what extent it can help companies predict future language difficulties in the private participation projects.

Compared to other types of investments, MNCs investing in private participation projects usually need to interact with a higher number of stakeholders. First, these projects tend to provide public goods such as electricity, water, or roads that affect a wide range of users. Besides, they tend to draw media attention and to be subject to nationalistic pressure from public opinion and special interest groups to keep the project under domestic control in order to contribute more to the local economy (Newman 2000; Shi et al. 2016). Finally, private participation projects are organized in a different way than other investments abroad, which makes this type of projects an excellent setting for testing the impact of GLD. This is because MNCs investing in private participation projects are legally and financially protected from the liabilities of the project, which isolates the influence of external factors to some extent and allows a better identification of the impact of the location and other project characteristics on its likelihood to succeed characteristics of the project (Brealey et al. 1996; Nevitt and Fabozzi 2000).

Building on Karhunen et al. (2018) who distinguish a social practice view on language in MNCs compared to a functional and more individual view (see Brannen and Doz 2010; Piekkari and Welch 2010), our focus on both internal and external stakeholders lead us adapt the social practice view of language in MNCs. Building on this situation, we here analyze the role of GLD in private participation projects. In this paper, we specifically aim to address the following research questions: (1) does GLD affect the performance of private participation projects?, and (2) which project-level factors moderate this relationship?

In order to address these questions, we analyze a sample of 5440 private participation projects in 64 emerging economies. Responding to calls for more quantitative research on the influence of language use in MNCs (Barner-Rasmussen and Aarnio 2011) in order to add balance to the largely case-study based approach in previous research (Tietze 2007), we thus adopt a quantitative research approach to study the phenomenon of language genealogical distance in cross-border communication across a wide range of projects and countries.

Our theoretical foundation builds on previous research on language in international business settings (Harzing et al. 2011; Lauring and Klitm0ller 2015; Marschan et al. 1997), and on arguments from transaction cost economics (Dow et al. 2016; Williamson 1979, 1981) to argue that larger GLD increases uncertainty and transaction costs as a consequence of potential misunderstandings and opportunistic behaviors, which has a negative impact on private participation projects. However, we also argue that some specific project-level characteristics can reduce the uncertainty and transaction costs associated to larger language distance.

By emphasizing the pivotal role of GLD on the success of the project, we make a contribution to the strategic management literature on cross-border communication and, specifically, to the growing body of literature focused on private participation projects (Inoue et al. 2013; Jiang et al. 2015). Furthermore, we also make a valuable managerial contribution by testing the moderating effect of various project-level characteristics on this relationship, identifying some factors that can reduce the problems associated to larger language distance.

The remainder of the paper is structured as follows: we conduct a literature review and set out our hypotheses in the second section. In the third section, we describe our sample, variables and estimation technique. Subsequently, we present our results in the fourth section and finally conclude with a discussion of our findings.

2 Literature Review and Hypotheses

2.1 Language and MNCs

Given the current socio-political context, it can easily be argued that globalization is running out of steam due to increasing transaction costs and the rise of populism (Gilmartin et al. 2018; Mudambi 2018; Stiglitz 2018). It is precisely because of such backlashes that the study of language as a barrier or as a connector is crucial. In this section we aim to briefly describe the importance of language and cross-border communication and their impacts on business contexts (Peltokorpi 2010), especially within MNCs. Addressing the impact of language in business settings, Holmqvist and Gronroos (2012) highlight that even though English has come to fulfill the role of a global lingua franca (Crystal 2003; Peters 2004), the large majority of people in the world still speak no English (see Crystal 2003), and even among those who do, many are not fully fluent. Language thus plays a crucial and immediate role as a tool of communication (Marschan-Piekkari and Zander 2005).

However, the use of language extends beyond the mere practical use of cross-border communication, as language also plays an important role in identity (Holmqvist 2011). This role of language as part of one's identity extend into business settings, where recent studies on consumers have shown that even though consumers are perfectly fluent in a second language, they may be reluctant to use it for various ideological reasons (Holmqvist et al. 2014; Van Vaerenbergh and Holmqvist 2014). In the field of management, Marschan et al. (1997) highlighted language as 'the forgotten factor' in management. Since then, the last decades have seen an increase in research into the role of language in multinational settings, with increased recognition in a body of management literature that language use in MNCs needs to be studied in its own right, and not 'just' as a component of culture (see Barner-Rasmussen and Aarnio 2011 for a review). Analyzing the roles of both cultural skills and language skills for key functions in multinational corporations, previous research has shown that individuals with both language skills and cultural skills excel in performing demanding key functions as compared to individuals with only cultural skills (Barner-Rasmussen et al. 2014), thus underlining the importance of language skills as a separate and crucial notion in research into MNCs.


Um weiterzulesen


VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT