Knowledge transfer in multinational enterprises: A language and information processing view

One foundation on which the interunit knowledge transfer process is built is that of language. Language is seen as being common to the organizational community, and having a common language makes it easier to communicate functional expertise. What if, however, the language used to transfer knowledge is not common to both units?; In an organization that spans language boundaries, as the multinational enterprise (MNE) often does, language issues can exacerbate the difficulties of international management, adding to an already complex environment of differing cultures and institutions. This study addresses how language affects the ability of the MNE to transfer knowledge across borders---a process reliant on communication and crucial to the firm's success. Using relevance theory from the field of linguistics, I develop the construct of linguistic distance (the degree of non-overlap in linguistic resources between any pair of languages). I relate linguistic distance to the process of communication and develop a model of cross-linguistic knowledge transfer, which is put to the test in the empirical setting of the MNE.; The general claims tested are that greater linguistic distance between MNE headquarters and subsidiary will negatively affect both knowledge transfer and the level of subsidiary normative integration. Received international management theory suggests that greater linguistic distance brings greater need for local responsiveness, thus increasing the value of normative integration as a means of alleviating information processing burdens. The argument advanced here acknowledges this need, but suggests that anticipated difficulties occasioned by language differences will cause either or both headquarters and subsidiary to avoid informal relations.; Results are mixed with regard to the direct effects of linguistic distance on knowledge transfer. While distance shows the expected negative effect on ease of knowledge communication, it is positively correlated with knowledge understanding. This suggests that linguistic closeness may pose a greater challenge, as there is less awareness of potential misunderstanding. Discussion of these results ties back to linguistic theory, in positing an explanation based on foreign language learning strategies. Results unequivocally support the negative association of linguistic distance with normative integration, as well as the mediating role of normative integration in knowledge transfer.