Language Issues In Multinational Management Research Paper

There are many definitions of what constitutes a multinational corporation. A common view is that a multinational corporation is a large firm headquartered in one country but with subsidiaries in a number of other countries. It actively manages these subsidiary operations, which are an integral part of the company both strategically and organizationally. In the light of this general definition, it is clear that some firms will be more multinational than others. The degree of multinationality may be a function of the number and size of foreign subsidiaries, the number of countries in which the firm has subsidiaries, the proportion of assets, revenue, income, or employment accounted for by its foreign subsidiaries, the range of activities that foreign subsidiaries are responsible for (sales, marketing, production, research and development, etc.), and the degree to which top managers represent different nationalities and have personally internationalized themselves. Moreover, the ownership base of the multinational corporation may be international in its profile.

Compared to a domestic firm, a multinational corporation consists of headquarters and subsidiary units, which are located in different national, cultural, and language environments. While a domestic firm in a large country may face regional or even ethnic differences in headquarters-subsidiary relationships, the differences the multinational corporation experiences at the international level are of another magnitude. Consider the following example. A Finnish engineering company, Kone Corporation, headquartered in Finland, sources and produces some of its components and elevators in China, designs and manufactures particular elevator types in Italy, carries out research and development in Finland and the United States, and generates sales of elevators, escalators, and automatic doors in a number of countries worldwide. For the Finnish staff, creating and maintaining relationships with subsidiaries in China is particularly challenging due to the geographical distance, different time zones, and cultural and language barriers. Thus, compared to a domestic firm, the organizational context in which headquarters-subsidiary and intersubsidiary relationships are embedded is simultaneously multinational, multicultural, and multilingual.

As the example of Kone Corporation illustrates, multinational corporations often organize their foreign operations as a network of subsidiary units that are geographically scattered across many countries and continents but closely interconnected through flows of components, products, people, and information. The lifeblood of such a global network is communication, and language is the principal means of communication. Despite the wide use of English in international business activities, the reality of the multinational corporation is far from monolingual. Thus, adopting an English-only approach is not a viable solution for top management of the multinational corporation. Indeed, language diversity characterizes the daily operations of these large firms, and knowledge of foreign languages is an important personal asset for both headquarters and subsidiary staff. The effects of foreign language competence on individuals in terms of careers, job performance, and social exclusion/inclusion at the workplace, for example, will be discussed later in this research-paper. Moreover, the broader organizational effects on the integration of acquired units will also be examined. Future managers need to be aware of the impact of language on multinational management. Having such an awareness is far from being illusory or diminishing, because the impact of language persists.

Until fairly recently, language as a separate variable has gained very limited attention in the field of international management in general. This is because language, if considered at all, is often subsumed into the broader concept of culture. The present research-paper aims to examine language issues in multinational corporations and argues that an English-only approach is inadequate to manage what is a complex and evolving enterprise. The discussion centers on the inner workings and internal relationships of the multi-national corporation rather than on external contacts with suppliers, customers, and competitors. More specifically, the research-paper focuses on why language matters in managing the multinational corporation in the 21st century and provides some solutions as to how language challenges may be resolved.

The remainder of this research-paper is organized as follows. First, the limits of an English-only approach to managing the multinational corporation are discussed. Second, the meaning of language and language diversity is explained and situated in the organizational context of the multinational corporation. Inevitably, given that language skills reside in individuals, the focus is on managing people. The effect of language on individual careers and informal, personal communication networks are examined. Moreover, the role of language in foreign subsidiary management is explained. Also, the advantages and disadvantages of machine translation are assessed. In the concluding sections, future directions of the field are presented with a summary of the main arguments made in the research-paper. Throughout the research-paper, a language perspective on multinational management is explicitly adopted.

Why Is Speaking English Not Enough?

It is commonly argued, particularly by those from English-speaking backgrounds, that language is a peripheral issue in multinational management. Since English has become the conduit of international business, language is not regarded as a problem or, at best, its importance is seen to decline due to the forces of globalization. Building on previous research by the author and her Australian colleagues (Marschan-Piekkari, Welch, & Welch, 1999a, 1999b; Welch, Welch, & Marschan-Piekkari, 2001), this research-paper presents a contradictory view by introducing a set of arguments as to why language still matters and why multinational corporations in the 21st century cannot be managed by an English-only approach. Consider the following arguments.

First, the wide use of English in international business encounters has not yet rendered the corporate world monolingual. Research by Marschan-Piekkari et al. (1999a) shows that staff in multinational corporations often operate at the interface between several languages including those of the home country, the common corporate language, and the various subsidiary languages. While many multinational corporations adopt English as the common corporate language, English is not necessarily an overruling language in in-house communication but is used more generally as an intermediary language between various parallel subsidiary or headquarters languages. For example, once documents in English arrive at subsidiaries, they are likely to be translated into the respective local languages. Fluency in English among subsidiary staff (as well as headquarters staff) is likely to vary, as staff members may revert to one or more other languages alongside English when engaging in international communication. In particular, much of the informal communication is likely to occur in multiple languages, as will be discussed later in the research-paper.

Second, the rise of new economic powers such as China (see, e.g., Akoorie & Scott-Kennel, 2005) means an inevitable rise in the importance and use of the Chinese language(s) as more firms enter China and Chinese firms expand abroad. The acquisition of the personal computer division of IBM by Lenovo, China’s largest personal computer manufacturer, is a case in point. Overall, the current and anticipated role of China in the world economy is also reflected in the increasing demand for multilingual Web sites (including Mandarin) on the Internet. Thus, language diversity is likely to characterize international business activities also in the future.

Third, while English as the common working language has facilitated international exchanges, it has also introduced communication challenges of a different kind. As Henderson (2005) explains based on her study of international management teams, the use of English may create a false impression that the parties engaged in the communication share the same context and make the same interpretation. In fact, she notes that members of the management team continue to use diverse frames of reference derived from their respective native tongues. From this perspective, subtle communication differences may be bypassed unnoticed when parties are forced to operate in English as a second language.

Fourth, it is difficult to engage in social interaction and develop close personal relationships using interpreters, translators, or automatic translation software. While these media have a valid place in facilitating certain types of international communication, they are not “a cure for all ills” in international communication. When confronted with the language barrier, a common response is to regard it as merely a technical problem that can be readily addressed through appropriate language aids. Yet, it is useful to note that translation is not the same as personal communication, which is often essential when exchanging complex information building on trust. There is also the question of security of commercial-in-confidence material, as well as the problem that technical information may be inaccurately translated (Welch, Welch, & Piekkari, 2006).

Fifth, hiring employees with the requisite foreign language skills and/or providing language training is just another way of seemingly removing the language problem. It takes substantial time for a person to reach a level of operational fluency in another language, though the actual amount of time will vary depending on each individual’s aptitude and motivation to learn. Firms face questions of whether to invest in the training of existing staff in the desired foreign language or whether to hire new staff with the appropriate language skills, assuming that such employees are readily available. It is worth bearing in mind that there are considerable national differences in terms of foreign-language training at schools. For example, in Scandinavia and the Netherlands, it is common that young people speak more than three languages alongside their native tongues. This stands in sharp contrast to the situation in many Anglo-Saxon countries. Either way, the company faces additional costs as well as the time constraint in achieving the necessary skills base (Welch et al. 2006).

Sixth, despite the fact that English has become the main vehicle of professional management education originating from the United States in the form of popular MBA programs (Tietze, 2004) and transformed corporate elites into an English-speaking group, personnel at lower organizational levels seldom possess the language skills and vocabulary to effectively operate in the workplace. For example, the common corporate language of the new, enlarged Lenovo previously mentioned is English. The senior Chinese executives of the company are comfortable operating in English, but not all of their subordinates are fluent. In addition, hardly anyone from the IBM side speaks Mandarin, which renders the challenge facing the merging company considerable. Thus, international communication in several languages is particularly important at organizational levels below top and middle management.

The arguments just presented paint a picture of a multilingual corporation in which speaking English is not enough. The following section goes deeper into the concept of language diversity and discusses it in the context of the multinational corporation.

Language Diversity in the Multinational Corporation

Being headquartered in one country and having foreign subsidiary operations in a number of other countries renders the multinational corporation multilingual almost by definition (Barner-Rasmussen & Bjorkman, 2007). From a language perspective, the multinational corporation is likely to have a parent country language, a common corporate language, and a range of host country languages used by foreign subsidiary staff. While for companies internationalizing from English-speaking countries the parent country language and the common corporate language tend to be the same, the situation for the German-based Siemens Corporation is more complex. Siemens uses predominantly German and English in its corporate communication (Fredriksson, Barner-Rasmussen, & Piekkari, 2006). It is a globally operating electronics and electrical-engineering company with some 475,000 employees and a presence in over 190 countries. Siemens was ranked 28th on the Fortune Global 500 list in 2007 and 22nd in 2006 (“Fortune Global 500 in 2007”, 2007). Most of the employees are located in Germany (34%) and in the rest of Europe (27%). Top management in Siemens tends to have strong language skills in at least these two key languages. Thus, German as the parent country language of Siemens is an additional source of internal language diversity.

In an attempt to manage internal language diversity and overcome it, several multinational corporations such as General Electric, Nokia, and Electrolux have adopted English as a common corporate language to facilitate in-house communication. This decision, however, which often falls on English, does not in itself resolve the language diversity associated with daily operations of the multinational corporation. First, the level of proficiency in the common corporate language is likely to vary resulting in different kinds of “Englishes” and causing comprehension problems (Charles & Marschan-Piekkari, 2002). For example, in their study of Japanese-owned subsidiaries in Scotland, Wright, Kumagai, and Bonney (2001) identified a specific form of everyday spoken language, “broken English” or “pidgin English,” which the Scottish personnel used when communicating with the Japanese management. Moreover, even native speakers of English may struggle with strong Irish, Scottish, or Northern English accents. Second, lower level employees in foreign subsidiaries are inclined to speak only their local language. Despite the use of a common corporate language, international communication between units of the firm is frequently carried out in a mixture of languages.

Multinational corporations are likely to follow different language strategies. While some multinational corporations may choose one common corporate language and prioritize it in their internal communication, other companies may consciously or unconsciously avoid making this decision. For example, Scandinavian Airlines (SAS), which is a pan-Scandinavian organization originating from Sweden, Denmark, and Norway, did not formally appoint a common corporate language partly due to an attempt to maintain the power balance between the three nations (Bruntse, 2003). Alongside English, Scandinavian languages were extensively used within SAS, which was characteristic for its internal communication. In the Siemens case, neither German nor English held unambiguously the position of a common corporate language although there was a strong trend of convergence toward English in many parts of the organization. One may speculate that, in order not to provoke emotional reactions from either the “German” or the “non-German” parts of Siemens, the issue of a common corporate language was intentionally left ambiguous and allowed to solve itself in an emergent manner, inviting different parties to make their own interpretations (Fredrikssonet et al., 2006).

Furthermore, the internal communication in multinational corporations is colored by “company speak” and professional jargon (Welch, Welch, & Piekkari, 2005). “Company speak” refers to acronyms, special terms, and abbreviations that are specific to the company. For example, General Electric uses abbreviations such as N-1 and N-2 to indicate the person’s status in the organizational hierarchy. Newly recruited staff may easily find themselves excluded from communication exchanges and social interaction be-cause they do not master this form of language. On the other hand, once a person learns to master the professional jargon associated with the job, it facilitates communication. For example, engineers, who have similar professional training worldwide and who therefore share a common terminology, belong to the same professional community. They all speak “the same language” when it comes to their jobs. Although these engineers may be located in different foreign subsidiaries of the multinational corporations and speak different mother tongues, they are still likely to communicate with relative ease.

Thus, language diversity stems from the organizational and professional context of the multinational corporation, which is complex, heterogeneous, and geographically scattered.

Language and Careers

The requirements for foreign-language competence have been increasing during the last few years due to several reasons. As multinational corporations have introduced network structures and encouraged direct communication between foreign subsidiaries, there is a growing need to use foreign languages in the daily work. This applies not only to the top echelons of the organization but also further down the hierarchy, “democratizing” and demystifying international communication (Charles & Marschan-Piekkari, 2002). In practice, this means that the responsibilities of managers and employees, who are based nationally, are also likely to entail international elements of working and communicating across borders. At the same time, a growing number of managers and specialists physically relocate on long-term or short-term assignments or travel extensively abroad in order to carry out their work responsibilities.

Foreign language competence is likely to influence employees’ chances of advancing their careers within the multinational corporation. Some multinational corporations value foreign-language competence to the extent that it is used as an explicit criterion in recruitment and promotion decisions. For example, language ability is an important aspect of selecting expatriates for foreign assignments and in evaluating expatriate performance. More specifically, Dowling and Welch (2004) refer to the expatriate’s skills in the local language of the host country as well as in the common corporate language of the multinational corporation. In many recruitment and selection decisions, however, more emphasis tends to be placed on professional competence rather than language competence. Overall, gaining foreign work experience through expatriate postings may be regarded as a “must” for somebody who aims to climb up the corporate ladder.

The effects of foreign-language competence on career paths may take various forms. As discussed previously, many multinational corporations introduce a common corporate language to facilitate internal communication. Some groups of existing employees will master this language while others will need to decide whether to invest the time and energy in order to learn this language. For outsiders, the choice of the common corporate language may also shape the company image among potential recruits in terms of its attractiveness as a potential employer. Once a common corporate language is in place, it becomes a requirement for admittance to corporate training and management-development programs, potential international assignments, and promotion thus affecting individual career opportunities (Marschan-Piekkari et al. 1999b). For example, in a study of a Finnish-Swedish merger, Swedish was introduced as the common corporate language of the merged organization. It was found that the Swedish language operated as a “glass ceiling” effectively excluding non-Swedish-speaking individuals from career advancement (Piekkari, Vaara, Tienari, & Santti, 2005).

Research on Japanese-owned subsidiaries in different parts of the world provides similar findings (e.g., Wright et al. 2001). In Japanese companies, senior positions are filled mostly with Japanese nationals, rendering the Japanese language a significant source of power. In a similar vein, the Japanese language creates a “glass ceiling” restricting the upward mobility of non-Japanese staff and making them pursue different careers. This may mean that particular nationalities or groups of employees are preferred over others resulting in selective recruitment and promotion practices. However, with the increasing degree of internationalization and diversification of personnel working for multinational corporations, frequent calls for equal opportunity are made. Thus, the meaning and interpretation of equal opportunity should also take into account the possibilities of representatives from different nationalities and language groups advancing in their careers.

At international workplaces, foreign-language competence also affects perceptions of professional competence and identity. For example, after the introduction of Swedish as the common corporate language of the Finnish-Swedish merger, many Finns had to operate professionally without adequate levels of proficiency in the common corporate language. Consequently, these otherwise capable and useful employees appeared unintelligent in their encounters with the Swedes: in short, they felt that speaking Swedish lowered their IQ. The Finns often remained silent although professionalism would have required active participation. In a way, their professional competence was hidden behind the language barrier and they seemed to be underperforming (Piekkari et al. 2005).

In sum, the introduction of a common corporate language may influence individual career paths through self-selection as well as through top-management measures to explicitly move or rotate staff with the purpose of developing a better fit between foreign-language requirements of the job and individual competences.

Language-Based Communication Networks

While language issues are likely to affect individual careers in several ways, they also shape personal communication networks by connecting people who share a common language. These personal communication networks may be used for company purposes as well as for personal purposes in order to advance one’s own career beyond the boundaries of the firm.

An individual who is competent in key languages of the multinational corporation may have more opportunity to gain a strategically important position beyond his or her formal, hierarchical status than a colleague who lacks this capability (Marschan, Welch, & Welch, 1997). Marschan-Piekkari et al. (1999a) have termed these individuals “language nodes.” They are comfortable operating across several language interfaces such as the subsidiary language used in the host country, the common corporate language and the parent-country language. These so-called language nodes communicate, often informally, with colleagues in other subsidiaries and headquarters units and operate as intermediaries in information exchanges. This nodal position is likely to contribute both to the quality and quantity of the personal communication networks. For example, a Finnish engineer working for a Finnish-owned subsidiary in Mexico of Kone Corporation was competent in Spanish (subsidiary language), English (common corporate language), and Finnish (parent-country language). Given his long tenure with the company, he was also proficient in the “company speak.” His language skills contributed to his ability to communicate with local colleagues in the Mexican subsidiary, staff in other Spanish-speaking units as well as with Finnish- and English-speaking personnel. Not surprisingly, he occupied an important position in the internal communication network of the subsidiary.

One explanation for the emergence of language-based communication is interpersonal similarity (Makela, Kalla, & Piekkari, 2007). People have a tendency to interact with others whom they perceive as similar and a shared language is a strong factor facilitating such interaction. On the other hand, language is also a powerful mechanism for social exclusion and a divider between social groups. For example, subsidiary managers often find themselves socially excluded when employees at Finnish headquarters revert to their native tongue and speak their “secret language” during international-management meetings. Similarly, expatriates, who are sent on foreign assignments to work for one of the subsidiaries abroad, will miss the intricacies and nuances of the more formal communication that occurs in the office setting if they do not speak the local language.

On the organizational level, personal communication networks may have an aggregate effect of forming language-based clusters (Makela et al. 2007). In other words, similar people have a tendency to flock together, thus creating informal clusters such as the Germanic, Anglo, Latin, and the Scandinavian clusters within the multinational corporation. Such informal clusters are likely to emerge even though English is used as the common corporate language within the firm. Members of the Germanic cluster, for ex-ample, readily exchange information and knowledge with each other in German. The exchanges are likely to flow better within clusters (in terms of quantity, quality, and speed) rather than between clusters such as the Germanic and the Anglo cluster where complete communication blockages may exist. Creating and maintaining informal, personal relationships driven by a common language is widely used as a mechanism to overcome the language barrier. The power of such informal connecting points between people in different parts of the multinational corporation has serious implications for how to manage the entire enterprise and its foreign subsidiaries.

Foreign Subsidiary Management

Foreign subsidiaries are part of the multinational corporation through ownership ties. Some foreign subsidiaries may enjoy highly autonomous and independent positions within the firm while others may be more tightly managed and controlled. The management task to integrate, coordinate, and control foreign subsidiaries involves a great deal of communication between headquarters and the subsidiaries, and it is therefore affected by language considerations. For example, building and spreading shared practices across the subsidiary network, introducing a new organizational structure with reporting lines, agreeing upon budgetary controls, and submitting monthly reports all require consultation and discussion between headquarters and the subsidiaries. The language competence of the managers involved is a power resource with which to resist or negotiate the use of control and coordination mechanisms to manage foreign subsidiaries.

Previous research has shown that foreign subsidiaries are often managed and controlled in linguistically constrained environments. For example, case studies of Kone Elevators and Escalators show that control efforts were targeted at a large number of foreign subsidiaries whose employees were not native speakers of the common corporate language, English, and whose level of competence was low (Marschan-Piekkari et al. 1999a, 1999b). Furthermore, the experience of a Danish company with two subsidiaries (about 130 employees) in France illustrates how one single person at headquarters, a French-speaking Dane, acted as a conduit and connector in the communication and control processes with the French units (Andersen & Rasmussen, 2004). In another study, it was found that language barriers reduced the number of top-management visits to foreign units whose language they did not master (Barner-Rasmussen, 2003). It is clear that the quality of the headquarters-subsidiary relationship in terms of trust and closeness is likely to suffer from the language barrier experienced by the parties involved.

Like individuals who may be socially excluded or included due to their language competence, foreign subsidiaries may see their role and task change partly due to language considerations. On the one hand, a foreign subsidiary lacking staff with the relevant language skills to communicate with headquarters may enjoy a relatively autonomous position vis-à-vis headquarters. In fact, lan-guage may provide a shield from the headquarters’ scrutiny. On the other hand, the lack of language competence may result in feelings of isolation and marginalization among subsidiary staff (Welch et al. 2005). One mechanism to enhance connectivity across foreign subsidiaries is expatriate assignments.

Staff transfers are often used as a way to support communication and control of foreign subsidiaries. Sending a trusted employee from headquarters to a key position in a foreign subsidiary is likely to facilitate communication between the units involved. However, while headquarters-subsidiary communication is likely to improve, the language barrier may be introduced between the expatriate and the local subsidiary personnel. Consider an American expatriate who has been sent on foreign assignment from the U.S. headquarters to the subsidiary in Japan. Since the expatriate does not speak Japanese, English is used as the common language. Japanese managers have to accept it although they are disadvantaged by their low command of English. Some local managers may experience alienation and isolation because they are often left out or bypassed by the American expatriate or even by their local colleagues whose fluency in English is better than their own. In a similar vein, the American expatriate may find it very difficult to break into the very close local communication networks due to limited skills in Japanese. As in the case of local Japanese staff, the challenges associated with the language barrier in international communication at the workplace are likely to cause frustration and a sense of peripherality. Thus, language training of expatriates should be a high priority in multinational corporations.

Taken together, language affects foreign subsidiary management in myriads of ways. In the following, the use of translators and other language aids will be discussed as partial solutions to the language barrier.

The Use of Translators and Machine Translation

Where a common language is not shared by individuals who need to communicate within the multinational corporation, some form of language aid or intermediary is required to perform the translation. These can be internal or external to the firm as well as personal or machine based. External, professional translators are often ineffective when technical and specialized languages are involved and in promotional situations in which an ability to respond rapidly is important (Welch et al. 2005). Working through a personal translator, however, has implications in terms of quality of communication, time spent on translation, costs of translation, and nature of the relationship between the communicating parties (Welch et al. 2001).

Recently, new solutions such as machine translation have been provided to solve various problems associated with international communication (“Tongues of the Web” 2002). With the emergence of multilingual Web sites, machine translation provides speedy translations. Machine translation, which is the use of computers to translate documents from one language to another automatically, works best when the system has been customized for a particular topic such as microbiology, aerospace, or particle physics. The commonly used professional vocabulary and technical terms are at the heart of the translation (“Tongues of the Web” 2002). Colloquial language, slang, and ungrammatical expressions, which are often used in ads, for example, are very hard to successfully translate by machine. However, the Internet has considerably changed the requirements for machine translation: users want speed, rather than quality, and are more likely to accept poor results (“Tongues of the Web” 2002).

A study on machine translation among different types of Finnish organizations aimed to map the corporate use of such a language-aid and collect experiences among test users regarding the quality of the translation service (Lindholm, Lindqvist, & Miettinen, 2006). The target organizations were categorized into three groups including (a) multinational corporations, (b) public organizations, and (c) importers. The findings show that the need for machine translation varied significantly across the three types of organizations with importers representing the group with highest demand for such services. Since this research-paper deals with multinational corporations, the potential for using machine translation services in this organizational context will be discussed. In addition, importers are a useful example for contrasting purposes and therefore will be briefly covered.

In the four multinational corporations studied, a considerable amount of English material was used. The average level of foreign-language competence was high among the headquarters staff who readily translated material from various languages and produced it in English, the common corporate language. Most of them had access to an electronic dictionary and used it in their daily work. Overall, employees working for multinational corporations are expected to be proficient in English although lower level employees may lack this capability. For them, a machine translation would be practical when translating e-mail messages and making sense of a text in a foreign language for personal use. The findings reveal that printed and public materials are often translated by external translation professionals with whom the company has collaborated with for many years. The test users in multinational corporations found that machine translation might be useful in producing a first draft of the text particularly in urgent situations. The study showed that the costs of translation were seldom systematically monitored and the persons interviewed did not have a clear understanding of the exact amount as these costs were often budgeted into the total costs of producing promotional material, for example. The authors conclude that wide adoption of machine translation would require an attitudinal change. Currently, employees are used to turning to a colleague who is competent in foreign languages rather than using computers for translation. Such practices may hide the true need and potential for machine translation (Lindholm et al. 2006).

In contrast to multinational corporations, importers are often small- or medium-sized enterprises that tend to lack specialized staff with the necessary language skills. Since using external professional translators is expensive, machine translation offers an economical alternative for translating package information, user instructions, manuals, ads, and so on. The study shows that importers often faced an urgent need to have a text translated. However, one of the challenges associated with machine translation is the lack of contextual knowledge. Needless to say, the quality of user manuals and instructions, for example, is highest in the original language. During the course of translation between multiple languages, some localization takes place that a machine does not recognize. Once a text has been translated by a machine, it is difficult and time consuming to correct it (Lindholm et al. 2006).

Interestingly, the quality of machine translation has not improved very much during the past decades (“Tongues of the Web” 2002). It is useful to keep in mind that one language cannot be completely translated into another. For example, the word “bread” when translated does not convey meaning very well as the actual bread differs considerably from culture to culture. At best, machine translation is a useful aid to support international communication by providing “rough-and-ready” translation. At the end of the day, however, it is often the personal relationships that play a vital role in ensuring that important information gets to the people who need it (Welch et al. 2005).

A different solution to translation hurdles is to minimize the use of words and utilize symbols instead. For example, the instruction manuals for assembling pieces of Ikea furniture often contain symbols, which are internationally well known. Also, drawings are frequently used to facilitate the transmission of the main message.

In short, language training, transfer, and placement of language-competent staff as well as the use of external, professional translators are potential measures to solve the language barrier, albeit expensive ones. Machine translation, in turn, is a much more economical alternative but the quality of the translation needs to be weighted against the purpose and urgency of communication.

Future Directions

As the globalization process unfolds, the need for staff with language and cultural competence grows all over the business world. While there will still be domestically oriented jobs and functions such as legal affairs, the effects of internationalization penetrate deeply into the structures and processes of the multinational corporation. Thus, the implications of the international business context are increasingly present when examining questions of, for example, careers and career management, gender and diversity issues, human resource management, and corporate culture. From a research and teaching perspective, this means more cross-fertilization between disciplines such as organizational behavior, strategic management, international business, and sociolinguistics.

Summary

This research-paper has focused on the question of why language matters in managing multinational corporations and how the language barrier can be overcome. Despite the dominant position of English as the main medium of international business communication, six arguments were presented to substantiate the view that a multinational corporation cannot be managed by an English-only approach. These arguments elaborated on, among other things, language diversity in the workplace, limits of translation equipment and language aids, lack of foreign language competence at organizational levels below top management, and the rise of new economic powers such as China. The notion of language diversity was further examined and grounded in the organizational context of the multinational corporation.

In answer to the question of why language matters, the effect of language on individual careers was discussed. Multinational corporations may reward individuals for investing in foreign language skills through recruitment, staffing, and promotion decisions as well as performance evaluation.

The introduction of a common corporate language may have an additional effect on careers by operating as a glass ceiling for those who lack the relevant language skills. At the same time, the choice of common corporate language may favor certain groups of staff who possess a language edge and therefore gain strategically important positions within the firm. Language skills also affect perceptions of professional competence and identity. Having to operate professionally in a language that one does not master seems to lower one’s IQ.

The emergence of informal, personal communication networks driven by a common language is additional evidence of why language matters in multinational management. These networks are powerful, as they may last over many years and cut across time zones as well as geographical distance. A common language can be regarded as a factor of interpersonal similarity explaining why people tend to interact with others who are similar to themselves. Personal, language-based networks form clusters on the organizational levels grouping staff into, for example, Anglo, Latin, Germanic, or Scandinavian clusters. Within these clusters, members readily exchange information and knowledge while the nonmembers located outside the clusters may experience severe communication blockages. The creation and maintenance of personal communication networks that operate in a particular language is a mechanism to overcome barriers in international communication.

Moving from the individual level of analysis and clusters to subsidiaries, the effects of language on foreign subsidiary management are discussed. It is argued that control and coordination of foreign subsidiaries involves a great deal of communication across borders and is thus influenced by language considerations. Language competence of subsidiary staff can be viewed as part of the subsidiary’s power base, which shapes the degree of subsidiary autonomy and its roles and tasks within the corporation. Language is one potential explanation for why some foreign subsidiaries are marginalized and remain in the periphery while others prosper and develop into core units of the firm.

Finally, the use of translators and machine translation is examined as a way of overcoming the language barrier. Multinational corporations are likely to use external, professional translators for printed material. It is acknowledged that while machine translation provides an economical and speedy translation of a text, the quality of the translation may suffer. However, when using the Internet and its many multilingual Web sites, for example, any translation may be better than none. This opens up new possibilities for machine translation, which might serve employees below top management with poor skills in English.

To conclude, in our modern way of life, most issues are measured and valued in quantitative terms. Therefore, a person’s qualitative abilities such as foreign language skills or cultural knowledge may not necessarily be highly appreciated. However, in order to succeed and make a career in multinational corporations, students in business and management need to have an understanding of foreign languages and cultures. Showing awareness and appreciation of the other is the foundation for any international business activity.

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