We extend previous research on language issues within firms by examining the strategic consequences of language barriers between firms. We elaborate underlying mechanisms of how, why, and when language differences matter in the selection of cross- border R&D partners. We develop a language distance construct which captures relative differences in linguistic structure for any language pair. We hypothesize and find situations in which language differences help, rather than hinder alliance formation. Our empirical results suggest an inverted U-shaped relationship between language distance and the likelihood of alliance formation. This relationship is further moderated by potential partners’ prior ties and technological distance.