Language and innovation

Abstract Strong‐future‐time reference (FTR) languages require speakers to grammatically mark future events, while weak‐FTR languages do not. Using data from 34 countries, we find that firms in countries where strong‐FTR languages are spoken have fewer patent counts and citations than those in countries where weak‐FTR languages are spoken. Further evidence shows that strong‐FTR languages affect inventors’ perceptions and beliefs about 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 in economic outcomes.