The Effect of Linguistic Distance on Cross-Border Merger and Acquisition (M&A) Deal Duration

Abstract

This paper presents a conceptual model of the role of linguistic distance affecting the duration of cross-border merger & acquisition (M&A). The duration is defined as the time taken for the official completion of negotiations among parties. We theorize that the larger the linguistic distance, the longer the duration of a cross-border M&A deal. This is because linguistic distance can create communication barriers in the negotiating process of cross-border M&A. However, there are mitigating factors that can weaken the effect of linguistic distance on cross-border M&A deal duration. Based on the research stream of language in international business (IB), we argue that lingua franca and culture similarity will weaken the effect of linguistic distance on cross-border M&A deal duration. Moreover, based on transaction cost economics, we argue that the participation of intermediaries in the cross-border M&A process, as well as industry technical standardisation, will weaken aforementioned effect of linguistic distance on cross-border M&A deal duration. This paper contributes to the international business literature by providing a nuanced understanding of how language differences can affect the M&A deal duration and presenting several moderating variables that may reduce the negative effect of linguistic distance.