Critically discuss how language differences between home and host country can influence MNCs entry mode strategy.

Project description
Multi-National Corporations (MNCs) engage in international business in order to exploit their firm specific advantages and location advantages of foreign countries. Depending on the ownership, location and internalising advantages, MNCs have to choose an appropriate entry mode from the various options available, for example, exporting, licensing, joint venturing and wholly owned foreign investment. Differences in languages between host country and home country increase the liability of foreignness and the costs and uncertainties of international transactions. Therefore, MNCs need to deal with multiple languages and the associated administrative and transactions costs with language differences. However, these language barriers can have different effects on different entry modes. The extent of MNCs exposure to language barrier will therefore depend on their entry mode. 
 
There is a sizable literature examining the effect of formal institutions and informal institutions (mainly culture) on entry mode choice. Although the effect of language on entry mode choice is a relatively understudied, there exist studies that examine the impact of language on some of the entry modes separately, for example, on trade (Hutchinson, 2002; Hutchinson, 2005; Ku & Zussman, 2010; Melitze, 2008), on FDI (Goldberg et al., 2005; Hejazi and Ma, 2011; Oh et al., 2011) and on joint ventures vs wholly owned subsidiaries (Lopez-Duarte & Vidal-Suarez, 2010). Therefore, your task involves relating your discussion to available literature and bringing in your own arguments to bridge the gaps in the literature as well as linking/extending it to the literature on international business entry mode. 
 
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Referencing Requirements: 
Davis, P. S., Desai, A. B., & Francis, J. D. 2000. Mode of international entry: An isomorphism perspective. Journal of International Business Studies, 31(2): 239-58. 
Egger, P. H. & Lassmann, A. 2012. The language effect in international trade: A meta-analysis. Economics Letters, 116(2): 221-24. 
Feely, A. J. & Harzing, A.-W. 2003. Language management in multinational companies. Cross Cultural Management, 10(2): 37 – 52. 
Goldberg, M. A., Heinkel, R. L. and Levi, M. D. (2005). “Foreign direct investment: The human dimension”, Journal of International Money and Finance, 24, 6, 913-934. 
Grinblatt, M and Keloharju, M (2001). “How Distance, Language, and Culture 
Influence Stockholdings and Trades”, The Journal of Finance, LV1(3), 1053-1073 
Harzing, A.-W. & Feely, A. J. 2008. The language barrier and its implications for HQ-subsidiary relationships. Cross Cultural Management: An International Journal, 15(1): 49-61. 
Harzing, A.-W., Köster, K., & Magner, U. 2011. Babel in business: The language barrier and its solutions in the HQ-subsidiary relationship. Journal of World Business, 46(3): 279-87. 
Hejazi, W. and Ma, J. (2011). “Gravity, the English language and international business”, Multinational Business Review, 19, 2, 152-167 
Hinds, P. J., Neeley, T. B., & Cramton, C. D. 2013. Language as a lightning rod: Power contests, emotion regulation, and subgroup dynamics in global teams. Journal of International Business Studies 
Hutchinson, W.K. 2002. Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade. Scottish Journal of Political Economy, 49(5): 544-556. 
Hutchinson, W.K. 2005. Linguistic Distance as a Determinant of Bilateral Trade, Southern Economic Journal, 72(01): 1-15. 
Ku, H., Zussman, A. 2010. Lingua franca: The role of English in international trade. Journal of Economic Behavior & Organisation, 75: 250-260. 
Lopez-Duarte, C. and Vidal-Suarez, M.M (2010). “External uncertainty and entry mode choice: Cultural distance, political risk and language diversity”, International Business Review 19, 575–588 
Luo, Y. & Shenkar, O. 2006. The multinational corporation as a multilingual community: Language and organization in a global context. Journal of International Business Studies, 37(3): 321-39. 
Melitze, J. 2008. Lanuage and foreign trade. European Economic Review. 52: 667-699 
Oh, C. H., Travis Selmier, W. and Lien, D. (2011). “International trade, foreign direct investment, and transaction costs in languages”, The Journal of Socio-Economics, 40, 6, 732-735. 
Vidal-Suárez, M. & López-Duarte, C. 2013. Language distance and international acquisitions: A transaction cost approach. International Journal of Cross Cultural Management. 
Welch, D. E., Welch, L. S., & Marschan-Piekkari, R. 2001. The persistent impact of language on global operations. Prometheus, 19(3): 193-209.

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