Language and discounting future value: language as a moderator of internationalization–innovation performance relationships

Abstract

PurposeResearch on relationships between firms' degree of internationalization (DOI) and innovation performance has been mixed, and moderators of these relationships need to be explored. We focus on patents granted as an indicator of innovation performance and explore the moderating role of firms' home-country languages on the DOI–innovation performance relationship. We argue that in countries with languages that always require speakers to grammatically mark the future, firms will focus less on the future value of patents, which should moderate DOI–innovation performance relationships.Design/methodology/approachWe use an unbalanced panel consisting of 567 firm-year observations of 64 different large automotive suppliers from the year 2007 through 2019. This database was analyzed using negative binomial models with a 3-years lag structure and firm controls.FindingsResults show a U-shaped DOI–innovation performance relationship, but only for firms from countries that do not always require speakers to grammatically mark the future. Additionally, a firm's status as being from a country where dominate languages always require speakers to grammatically mark the future has a direct negative relationship with innovation performance.Research limitations/implicationsLimitations are that the sample included a large number of firms from one country (i.e. Japan) and focused on a single industry. Additionally, we used a narrow operational definition of innovation performance (i.e. patents) and relied upon a single methodology. In terms of implications, we identify one moderator that helps explain mixed results of past DOI–innovation performance research, and we identify a direct relationship between language and innovation performance. Hence, future research in this area should control for the dominant language type of firms' home countries.Originality/valueTo our knowledge, this is the first study to examine how language moderates DOI–innovation performance relationships and also relates to innovation performance directly.