Gravity, the English language and international business

The purpose of this paper is to test the merits of the view that the English language has emerged as the dominant language in international business. If there is merit to this view, then the ability to speak English and its role as a lingua franca in the global economy would imply that countries which have English as an official language should have a benefit over non‐English‐speaking countries vis‐à‐vis their abilities to undertake international business.

Within an augmented gravity model framework, the importance of the English language in explaining bilateral foreign direct investment (FDI) data within the OECD is tested. In addition to English, all other common official languages within the OECD are also tested. Furthermore, the linguistic distance to English is used to test whether closeness of languages to English enhance international business activity.

The results indicate that English‐speaking countries within the OECD do have a benefit that comes with the English language. Furthermore, countries whose official languages are linguistically close to English benefit from the special role played by the English language. These results therefore highlight the importance of the English language in deploying multinational strategies, even in countries whose official language is not English.

These results therefore indicate the importance of the English language in international business. As such, having a proficiency with English within any corporation should enhance that corporation's ability to engage in international business.

Sharing a common language with FDI partners enhances the ability to communicate, and hence enhances FDI between the countries. This paper extends this evidence to show that when the common language is English, the common language effect is strongest.