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

Amol M Joshi and Nandini Lahiri
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Amol M Joshi: College of Business, Oregon State University, Corvallis, USA
Nandini Lahiri: Fox School of Business, Temple University, Philadelphia, USA

Journal of International Business Studies, 2015, vol. 46, issue 2, 123-152

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 (1988–2001), 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.

Date: 2015
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