Table of Contents
Impact on Transaction Costs
English Management Communication
English’s Natural Selection as Lingua Franca
Demand for Language Strategies
Improving Belief in Capacity
Improving Employee Buy-in
In the last decade, as the nature global economics compels more organizations to expand internationally, the importance of communication, in terms of cultural intelligence, has emerged as a main driver of effective supply chain relationships which increase the efficiency of operations by facilitating collaboration and trust. However, as international trade becomes more complex and the cost of conducting transactions increases, the importance of communication is being reframed in terms of the power of language. Studies show that “time spent communicating equals money, and time ill-spent increases transaction costs” (Selmier & Oh, 2012). As organizational members increasing are forced to interact across linguistic boundaries, the establishment of a lingua franca for global business as a means of counteracting complexities through the creation of group cohesiveness is being embraced by a growing number of multinational corporations. Studies show that mandating English as a corporate lingua franca contributes to the efficiency of business transactions in similar fashion to EDI (electronic data interchange) systems. English is the most widely used and recognizable language in the world. It is spoken at a useful level by more than 1.75 billion people worldwide (Neely, 2012). The use of a common language when conducting business transactions has been shown to promote trust and facilitate process efficiencies that lead to reductions in transaction costs.
A Review of the Literature
International trade at its most fundamental is based upon verbal and written communication. Despite the revolution of electronic communication, allowing instant communication across the globe without regard for national or continental boundaries, the majority of communications continue to rely on these basic human interactions. Traditionally, it is the impact of culture in international trade that draws the attention of academics. In the past decade, however, more researchers have begun to recognize the impacts of language on international trade. In their research article, Selmer and Oh (2012) examine the increase in language influence over transaction cost as the complexity of international trade and foreign direct investment increases. The authors also introduce the concept of language intensity which is a measure of the demand for linguistic input. Their research seeks to answer questions pertaining to (1) the impact of speaking a major trade language on international trade and FDI, (2) the quantification of benefits of English-speaking countries over those speaking other major trade languages, (3) the reason for languages’ impact on international business, and (4) how to prepare for global domination of business by a few trade languages.
Lauring and Selmer (2010) circulated a questionnaire among members of academic multicultural departments in Denmark for the purpose of discerning the association of international language management, specifically the English language, on three group cohesiveness variables: group involvement, group conflict, and group trust. His study found that English language consistency is positively associated with both group trust and group involvement but negatively associated with group conflict.
Beyene, Hinds and Cramton (2006) conducted a study of the imposition of a lingua franca mandate can generate the evolution of negative emotions that manifest in negative actions between native and non-native English speakers ultimately interfering with collaborative work. The authors found that, where these cases occur, there usually existed a set of circumstances where organizations had set an English-mandated lingua franca policy without having an implementation process in place to aid employees through the transition process. The lack of a directed implementation process often resulted in disparities between the language proficiency levels of native and non-native English speakers. These disparities, in turn, caused non-native speakers to experience negative emotions associated with feelings of diminished worth within the company. These emotions were routinely manifested in a cycle of negative actions which ultimately result in the disruption of information sharing and collaborative relationships.
Six years later, Beyene, now Dr. Neeley (2012), a Harvard professor of Organizational Behavior, supports the Englishnization of global business and believes that disparities in proficiency levels could be remedied by an implementation framework which she has developed. Further, she feels that there are more substantial forces driving multinational organizations towards the implementation of an English-mandated lingua franca. She argues that demands from competitive pressures, the need for better language comprehension in in cross-border collaboration, and the unsustainable language complexities involved with international mergers and acquisitions far outweighed emotional distresses brought about by disparity in proficiency levels.
Englishnization: Lingua Franca for Global Business
International trade at its most fundamental level is based upon verbal and written communication. Whether engaged in global sourcing, negotiating an international merger or acquisition, expanding into new markets, or simply processing an order over the internet, MNEs (multi-national enterprises) must communicate with those with whom they would transact. During the current period of expanding global economics, investment and trading into foreign markets is expanding as well. New entrants into foreign markets bring their cultures and languages as well as their economic potentials. The desire for a good or service must be expressed, and the parties involved in the transaction must be able to negotiate an acceptable agreement. As a result, foreign culture and language have become factors that contribute to the complexity required to conduct business on the international level. Researchers have found that while culture has an important role in development of the trust necessary for successful international trade and foreign direct investment, it is language that has the power to lower transaction costs and to develop the trust necessary for collaborative efforts that must take place at the operational level of cross-border operations. This language power can be quantified through the concept of language intensity, a measure of the demand for linguistic input required for trade and foreign direct investment (FDI). As the complexity of international business increases, so does the language intensity. The concept of language intensity does not point to any particular language as having superior ability to lower transaction costs; it only reveals that a language management strategy may be effective towards this objective.
Other studies, however, do indicate that the English language would be a superior choice as the global lingua franca. Although research involving the relationship between language and organizational management are still in the early development phase, early research has focused on the role international language management (ILM). ILM is “the facilitation and coordination of communication between members of different speech communities in multilingual organizations”. Research results show that English management communication was a dominating factor in the three major group cohesiveness variables: group involvement, group conflict, and group trust (Lauring & Selmer, 2010). Findings such as this may account for the increase in English-mandated language strategies among multinational enterprises (MNEs) and regulatory agencies.
Executive management is beginning to envision language strategies as a vehicle for sustaining growth on the global stage. Such was the rationale put forth by Hiroshi Mikitani, CEO of the Rakuten Group, when he announced that the goal of his implementation of an English-only mandate was “not becoming No. 1 in Japan but becoming the No. 1 Internet services company in the world” (Neeley, 2011). The immediate reaction of his workforce was one of shock and disbelief followed by speculations that Mikitani would not carry through with his mandate. The apprehension of the workforce was eclipsed only by senior management’s fear of losing face should they prove incapable of exhibiting proper English grammar by the end of Mikitani’ s 15-month deadline. Neely (2012) cautions that organizations will inevitably encounter obstacles to implementation of successful English-language policies, specifically those rooted in the shock experienced by employees, the erosion of self-confidence in non-native speakers, job-security fears, and resistance.
Impact on Transaction Costs
The business of international trade is complex. The distance between points of exchange, the abundance of regulations, the risk exposure (both financial and physical), the complexities of contract negotiations and the multitude of demands from customers (internal and external) combine to increase the complexities involved in international trade. As these supply chains become more complex, the more linguistic input that is required. Add to that the difficulties of members involved in the processes who do not speak the same language and the stage is set for break downs in process accuracy and efficiency. The more complex the operations involved in international trade, the more linguistic input required to facilitate the processes. The intent here is to calculate, or quantify, the complexity and, thus, the transaction cost attributable to languages.