Lingua Mercatoria: Language and Foreign Direct Investment1. Issue 2 (23rd October 2014)

• Record Type: Journal Article
• Authors: Kim, Moonhawk; Liu, Amy H.; Tuxhorn, Kim‐Lee; Brown, David S.; Leblang, David
• Is Part Of: International studies quarterly. Volume 59:Issue 2(2015:Jun.)
• Page Start: 330
• Page End: 343
• Publication Date: 2014-10-23
• Subjects: International relations -- Periodicals; World politics -- Periodicals; 303.482
• DOI: 10.1111/isqu.12158
• Languages: English
• ISSNs: 0020-8833

Abstract

Abstract : Does language choice attract foreign direct investment (FDI), and if so, how? We argue that language—a dynamic instrument for reducing transaction costs—can influence investors' decision to allocate capital. Potential host countries attract investments by coordinating their domestic language policies—especially those in education—to match the language of the potential FDI investor. We subject our argument to three different tests: (i) a cross‐sectional sample of all global Organization for Economic Co‐operation and Development investments that employs a newly constructed language‐in‐education measurement; (ii) a newly assembled time‐series cross‐sectional data set of all Chinese FDI abroad; and (iii) a detailed case study that uses process tracing to explain Chinese FDI in Indonesia. The results from these tests demonstrate a significant and robust relationship between language and FDI.