Publication Type

Journal Article

Version

submittedVersion

Publication Date

5-2015

Abstract

We study the effects of linguistic distance and lingua franca proficiency on the equity stake taken by acquirers from 67 countries in 59,092 acquisition targets in 69 host countries. We theorize and find that acquirers take lower equity stakes in foreign targets when linguistic distance and differences in lingua franca proficiency between them are high, and take higher stakes when the combined lingua franca proficiency of the parties is high. We also find that linguistic and cultural distance reduce the impact of the combined lingua franca proficiency of the parties on the level of equity taken, which shows that the effective use of a lingua franca is affected by the native tongues and cultures of the parties. Our results clearly demonstrate that governance research and international business studies can benefit from incorporating language into their explanatory models.

Keywords

linguistic distance, lingua franca, international acquisitions, entry modes

Discipline

Business | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Journal of International Business Studies

Volume

46

Issue

4

First Page

429

Last Page

442

ISSN

0047-2506

Identifier

10.1057/jibs.2014.71

Publisher

Palgrave

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1057/jibs.2014.71

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