Effective communication is critical to enable the successful management of a multinational company. Without a shared language, effective communication is impossible. Previous research have not established what the role of language is in establishing strong relationships between subsidiaries and headquarters. It is argued that if effective communication is enabled through the use of a shared language and effective communication strengthens relationships between subsidiaries and headquarters, then a shared language should influence subsidiary headquarter relationships positively.
A mixed method approach was used to reflect the perspective from both headquarters and subsidiaries. Questionnaires were distributed to subsidiaries and semi-structured interviews were conducted with executives from headquarters based on the results from the questionnaire.
Language was found to have a profound influence on relationships between subsidiaries and headquarters but the extent of the influence varied depending on time, less hierarchical organisational structures and cultural background. Social identity theory suggested groups of ethnically similar people would cluster together and form strong personal relationships, language being one such an ethnic characteristic. The data collected challenged this theory by proving that a company identity can prove to be stronger and more influential over time, surpassing the impact of language and ethnicity. It was also found that a shared language promoted social networks and power within the organisation but that the influence is more prominent when the shared language is the official company language.
The research contributed to literature by adding to the current understanding of what influences subsidiary headquarter relationships. The contribution to business is also important as attention is a scarce resource and inter unit relationships are critical to the success of any multinational company.