The many benefits of a shared language in multinationals

Knowledge sharing is a critical activity when it comes to multinational companies (MNCs) and doing business across borders. In a prior paper with Niels Noorderhaven (Noorderhaven & Harzing, 2009), I established the important role of social interaction in knowledge transfer. Crucial to social interaction is a shared language. There appear to be benefits of a shared language for MNC effectiveness, as an increasing number of MNCs are adopting a lingua franca, predominantly English, to improve communication and information flows.

languageWith my colleagues Sebastian Reiche and Markus Pudelko, I further explored the link between shared language and MNC knowledge flows. Specifically, we studied how shared language between subsidiary and HQ managers affects subsidiary knowledge inflows from HQ. Moreover, we draw on the theory of social identity, considering shared language and knowledge inflows as antecedents of a shared social identity, which in turn benefits the performance of MNCs.

  • Reiche B.S.; Harzing, A.W.; Pudelko, M. (2015) Why and how does shared language affect subsidiary knowledge inflows? A social identity perspective, Journal of International Business Studies, 46(5): 528-551. Available online... - Publisher's version (free access!)

Thanks to Middlesex University, this article is available in Gold Open Access, so it can be freely downloaded and shared by everyone. Please note: An extended version of this blog appeared on Sebastian’s Expatriatus blog.

Contextual knowledge and social identity

We started off with the notion that a large part of the knowledge in MNC units is contextual and tacit in nature, which makes the transfer of knowledge depend on actors adequately conveying and making sense of its meaning. At the same time, language differences between different MNC actors can set not only clear functional but also psychological barriers to social interaction. This highlights the role of shared language for tacit knowledge flows in MNCs. In MNCs, different units may share a language either because their members are proficient in the native language that is spoken in the respective other unit, or they may share a common corporate language that the organization has defined.

Further, we conceptualize knowledge flows based on a shared language as an act to construct a shared identity, because they provide the deep contextual understanding that allows individuals to do so. In other words, in the study we proposed that subsidiary managers sharing a language with HQ managers would properly understand knowledge from HQ and apply it to construct a common social identity with HQ. Building on a sample of 817 subsidiaries in nine countries/regions and a novel subjective measure of shared language, we found that shared language among subsidiary and HQ managers is indeed positively related to tacit knowledge inflows at the subsidiary level.

Mediating effect of shared goals and vision and HR centralization

We also found that there were two specific mediators of the relationship between shared language and subsidiary knowledge inflows from HQ:

  • the extent to which subsidiary managers share HQ goals and vision (which is an ability-related factor),
  • the extent to which human resources (HR) related decision-making is centralized (which is a motivational factor).

As such, our results imply that when subsidiary managers share HQ goals and vision, they are more able to acquire and make sense of HQ knowledge. A similar logic applies for the positive mediating effect of centralized HR decision-making, which makes subsidiary managers’ HQ identification more rewarding and, hence, knowledge receipt from HQ more motivating.

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Moderating effect of subsidiary type (greenfields vs. acquisitions)

We also found that the two mediated relationships are conditional upon subsidiary type. Our results demonstrate that both shared HQ goals and vision, and centralization of HR decisions only mediated the relationship between shared language and subsidiary knowledge inflows in foreign acquisitions but not in foreign greenfields.

In addition, our results also suggest direct moderation effects. First, the relationship between shared language and shared HQ goals was weaker in foreign greenfields compared to foreign acquisitions. This can probably be explained by the relative ease to diffuse HQ goals and vision to foreign greenfields as these units allow MNCs to more carefully select the local workforce.

We also found a negative moderation effect of subsidiary type on the relationship between centralization of HR decisions and subsidiary knowledge inflows, with the relationship being weaker again in foreign greenfields. As such, we suggest that HR centralization entails additional knowledge benefits in foreign acquisitions, for example by creating a common HR structure for knowledge to be transferred.

Managerial implications

Our study suggests viewing knowledge sharing also as an act of constructing a shared social identity, which implies that communication with HQ should not be left to only a few subsidiary managers, such as expatriates. Including a wider group of subsidiary managers, especially locals, into knowledge flows between HQ and subsidiary may foster the sense of shared identity, unity and cohesion, which are all beneficial factors for effective cooperation. As to facilitating knowledge flows, our study highlights the importance of implementing a shared language, clarifying common MNC goals and vision, and centralizing HR decisions, with the latter two particularly important in foreign acquisitions.

Other papers referred to in this blog

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