Does language affect the location choice of developing-economy MNEs? The case of Moroccan outward FDI

Abstract

The present paper investigates the effect of linguistic distance on location decisions of Moroccan outward foreign direct investment (FDI) using panel data on 54 host countries from 2007 to 2021 and the robust weighted least squares estimation method. The results show that the higher the share of French- and Arabic-speaking populations, the more the host country attracts FDI from Morocco. Also, the results show that the higher the share of the English-speaking population, the less the host country attracts FDI because English-speaking countries tend to adopt institutional structures (the Anglo-Saxon way of governance) that differ from the French model inherited by Morocco during its colonization. For Spanish, there is no effect on the location decisions of Moroccan multinational enterprises because of the language’s marginalization at the formal level. The study highlights important policy considerations for home and host countries in terms of investment policy and investment promotion, language-in-education policies, and the role of international cultural and linguistic institutes in home and host countries.