Extending the role of headquarters beyond the firm boundary: entrepreneurial alliance innovation

Abstract

Prior research on corporate headquarters (CHQ) characteristics identifies the impact of CHQ location and composition on the innovation outcomes of internal subsidiaries. However, given that external strategic alliances with high-tech entrepreneurial firms represent a key source of innovation for the corporation, corporations must also consider how their choices of CHQ location and composition affect the innovation outcomes of these partners. In a study of 36 incumbent pharmaceutical corporations in 377 strategic alliances with 143 VC-backed biotechnology startups, we leverage detailed hand-collected data on CHQ locations and functions to estimate the effect of the CHQ on the innovation performance of the corporations' entrepreneurial alliance partners. We find that a 1000-km decrease in CHQ-partner distance leads to an increase of 28 forward citations for the alliance partner, i.e., a 1% decrease in the distance is associated with a 1.7% increase in innovation performance. We find that the co-located presence of the corporation's R&D function at the CHQ attenuates the benefit of CHQ-partner proximity, particularly for alliances structured for horizontal collaboration at the same part of the value chain. This study contributes to the literatures on both CHQ design and technology alliances.

The tyranny of the head office? Revisiting corporate headquarters’ (CHQs) role in MNE subsidiary initiatives

“…CHQ in MNEs not only vary in how their activities are spatially distributed, but they also exhibit significant heterogeneity as to their internal functioning (Kim and Wu 2019;Steinberg and Kunisch 2016). This internal heterogeneity exists both in the formal organizational structure, such as working with regional and divisional HQ, and in the experience, knowledge, skills, and networks of corporate staff members (Kleinbaum and Stuart 2014;Kunisch and Galli 2014).…”

Corporate headquarters in the twenty-first century: an organization design perspective

“…In the twenty-first century, with the emergence of businesses that serve as platforms or important nodes in ecosystems, the location of CHQ in relation to “external” partners becomes an important concern. For example, Kim and Wu ( 2019 ) study firm’s strategic alliances and find that proximity of CHQ to alliance partners has a positive effect on innovation performance. More specifically, “a 1000-km decrease in CHQ–partner distance leads to an increase of 28 forward citations for the alliance partner, i.e., a 1% decrease in the distance is associated with a 1.7% increase in innovation performance.”…”

“…Future research should also explore how the CHQ’s scope can or should extend across organizational boundaries since those boundaries are blurring in business networks and ecosystems (Shipilov and Gawer 2020 ). While the study by Kim and Wu ( 2019 ) exemplifies CHQ research in the context of business networks, we still need to learn about the role played by the CHQ in the context of ecosystems and platforms. Such research may build on IB research, which has conceptualized the MNCs as networks, in which the CHQ and the international subsidiaries “are involved in a perpetual bargaining process” (e.g., Andersson et al 2007 ) rather than top-down authority in traditional corporate hierarchies.…”

“…While prior CHQ research has focused on CHQ location and proximity to subsidiaries, a few studies show that proximity vis-a-vis external stakeholders and proximity to business networks and ecosystems. Kim and Wu ( 2019 ), for example, show that CHQ locations are influenced by inter-organizational relationships. Likewise, Faems et al ( 2018 ) show that CHQ proximity matters for knowledge transfer between subsidiaries and unconnected sister alliances.…”