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.
linguistic distance, lingua franca, international acquisitions, entry modes
Business | Strategic Management Policy
Strategy and Organisation
Journal of International Business Studies
CUYPERS, Ilya; ERTUG, Gokhan; and HENNART, Jean-Francois.
The Effects of linguistic distance and lingua franca proficiency on the stake taken by acquirers in cross-border acquisitions. (2015). Journal of International Business Studies. 46, (4), 429-442. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4349
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