Is language an economic institution? Evidence from R&D investment

Chi, J. D., Su, X., Tang, Y. and Xu, B. ORCID: https://orcid.org/0000-0003-3512-5834 (2020) Is language an economic institution? Evidence from R&D investment. Journal of Corporate Finance, 62. 101578. ISSN 1872-6313 doi: 10.1016/j.jcorpfin.2020.101578

Abstract/Summary

Some languages encode future timing more ambiguously than others. We identify two economic channels through which more ambiguous reference to future timing leads to higher levels of R&D investment. Our empirical tests on country- and firm-level R&D investment confirm this prediction, even after controlling for an extensive set of formal and informal economic institutions and addressing endogeneity concern in multiple ways. Tests on patent generation provide further evidence that ambiguous reference to future timing leads to more innovation.