How Does the Context of Language Use Affect the Perception of Language Barriers?

Language commonality and barriers are often taken as exogenous given variable and independent of the context; however in this chapter we investigate the factors determining perception of language barriers. As such we are responding to the question of when do managers perceive language barriers and which business contexts foster the perception of language barriers and which do not? Language serves different purposes and entails different communicative requirements depending on the context in which it is used. In addition, language has multiple dimensions and we argue that the different dimensions of language vary in their importance depending on the specific context, where the contextual variation in this case is related to the operation mode chosen in the foreign market. More specifically, we argue that language distance (relatedness in language) matters when the firms conduct business abroad through their own employees, while language incidence (accuracy in language) is critical when operating through a local agent. The different use of language implies a need for different language skills. The combination of the operation mode and the availability of people with the needed language skills will affect managers’ perception of language barriers. The hypotheses are tested on a large data set encompassing 390 multinational corporations headquartered in Finland, South Korea, New Zealand, and Sweden that have undertaken a business operation in a foreign country.