The demand for foreign languages in Italian manufacturing

Knowledge of foreign languages is becoming increasingly important not only for connecting individuals, groups and organizations, but also as a tool for transferring ideas and increasing the internationalization commitment of firms. The economic literature on the field has particularly focused on the role of foreign languages in explaining wage inequality, immigrant labor integration and employability, whereas less attention has been devoted to the role of firm internal resources and strategies as drivers of the demand for foreign languages. Relying on a rich firm-level dataset, we try to fill this gap by identifying the factors underlying the demand for foreign languages by Italian manufacturing firms over the period 2001-2004. In so doing, we particularly focus on innovation and internationalization activities, like export, foreign markets penetration, technical and trade agreements and FDI. After estimating the probability to demand for the knowledge of foreign languages, we also estimate a set of bivariate probit models where we condition the firm demand for foreign languages with respect to the demand for other required qualifications, like the type of occupation, the level of education and the amount and type of experience. Our estimates show that the probability to demand for foreign languages increases with firm size, the skill intensity of the workforce, the firm engagement in R&D, and export, whereas the other internationalization activities are never statistically significant when taken separately. However, these latter become relevant once they accumulate to export, as firms commitment to internationalization increases. These results hold even when we further make the demand for foreign languages interact with other required qualifications. In this case, the effect of firm foreign expansion seems to be higher when the firm simultaneously demands for high-skill occupations, a secondary school degree and job- or sector-specific experience, whereas we register a very weak effect for tertiary education and for generic experience.