Language and Innovation: The Real Effect of Informal Institutions

45 Pages Posted: 10 Jul 2019

See all articles by Dongmin Kong

Dongmin Kong

Department of Finance, Huazhong University of Science and Technology; School of Finance, Zhongnan University of Economics and Law

Jialong Wang

Southwestern University of Finance and Economics (SWUFE)

Yanan Wang

Zhongnan University of Economics and Law

Jian Zhang

Shanghai International Studies University

Date Written: February 26, 2019

Abstract

Strong future-time reference (FTR) languages require speakers to grammatically mark future events, while weak-FTR languages do not. Using data from 33 countries, we find that firms in countries where strong-FTR languages are spoken are less likely to engage in innovative activities than those in countries where weak-FTR languages are spoken. Further evidence shows that strong-FTR languages affect inventors’ perceptions and beliefs around the future rewards from innovation. Moreover, due to interactions between people speaking different languages, globalization attenuates the negative impact of language FTR on innovation. To further support these findings, we provide evidence from a single country with a multilingual environment to control for omitted country-level characteristics. Our study emphasizes the impact of language on corporate innovation and sheds light on the importance of informal institutions on economic outcomes.

Keywords: Languages, Innovation, Future-time reference

JEL Classification: D02; G31; O30; Z13

Suggested Citation

Kong, Dongmin and Wang, Jialong and Wang, Yanan and Zhang, Jian, Language and Innovation: The Real Effect of Informal Institutions (February 26, 2019). Available at SSRN: https://ssrn.com/abstract=3416754 or http://dx.doi.org/10.2139/ssrn.3416754

Dongmin Kong (Contact Author)

Department of Finance, Huazhong University of Science and Technology ( email )

Wuhan, Hubei 430074
China

School of Finance, Zhongnan University of Economics and Law ( email )

Wuhan, Hubei 430073
China

Jialong Wang

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Yanan Wang

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Jian Zhang

Shanghai International Studies University ( email )

550 Dalian Road (West)
Shanghai, Shanghai 200083
China

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