Moynihan Institute of Global Affairs
Trade, Development and Political Economy
Amit Khandelwal: “Language Barriers in Multinationals and Knowledge Transfers”
A distinct feature of MNCs is a three-tier organizational structure: foreign managers (FMs) supervise domestic managers (DMs) who supervise production workers. Language barriers between FMs and DMs could impede transfers of management knowledge. The authors develop a model in which DMs learn general management by communicating with FMs, but communication effort is non-contractible. These conditions generate sub-optimal communication within the MNC. If communication is complementary with language skills, the planner could raise welfare by subsidizing foreign language acquisition. The authors experimentally assess the validity of the general skills and the complementarity assumptions in Myanmar, a setting where FMs and DMs communicate in English. The first experiment examines the general skills assumption by asking prospective employers at domestic firms to rate hypothetical job candidates. They value candidates with both higher English proficiency and MNC experience, a premium driven, in part, by frequent interactions with FMs. The second experiment examines the complementarity assumption by providing English training to a random sample of DMs working at MNCs. At endline, treated DMs have higher English proficiency, communicate more frequently with their FMs, are more involved in firm management, and perform better in simulated management tasks. Organizational barriers within MNCs can thus hinder knowledge transfers and lead to an under-investment in English relative to the social optimum.
Professor Khandelwal’s research focuses on the link between international trade and economic development. He has studied how trade reforms in China and India affected participation in global markets and firms’ productivity. He has implemented randomized trials that explore the causal impacts of trade, foreign direct investment, and technology adoption in Egypt, Myanmar, and Pakistan. His most recent work has examined the U.S. trade war and its implications for the U.S. economy. His expertise in policy issues includes international trade and industrial policy. At Columbia, he teaches courses in microeconomics, emerging markets, and has taught international seminars on the Indian, Chinese, and Myanmar economies. Khandelwal received a doctorate in economics from Yale University and bachelor’s degrees in economics and mathematics from Northwestern University.
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This event was first published on October 13, 2021 and last updated on October 29, 2021.