Towards a Regional Strategy: The Role of Regional Headquarters of Foreign Firms in Singapore

Abstract

This paper presents a framework for analysing the role of regional headquarters in the globalisation strategies of transnational corporations (TNCs). Drawing upon a theoretical gap in existing urban studies and international business literature, we argue that the triadisation and regionalisation of TNC activities increase the demand for control and co-ordination functions previously performed by the global headquarters. Many global corporations consequently establish regional headquarters to penetrate into emerging markets, which may be too geographically distant to be co-ordinated and managed by the global HQs, and to achieve simultaneously global integration and local responsiveness. Based upon an empirical survey of 130 RHQs in Singapore and 20 follow-up personal interviews, we test some of the propositions of this regional strategy framework. Our ndings tentatively con rm that three independent variables play a statistically signi cant role in shaping the strategic decision by global corporations to establish RHQs in Singapore: geographical distance, strategic necessity and the availability of business services.

Success Factors of Regional Strategies for Multinational Corporations: Exploring the Appropriate Degree of Regional Management Autonomy and Regional Product/Service Adaptation

“…These relationships can be explained by several reasons. First, at low levels of inter-regional distance, MNCs face only a minor liability of foreignness, where their respective familiarity with regional demands and requirements does not require a high allocation of decisions at the regional level (Yeung et al 2001;Zaheer and Mosakowski 1997). Therefore, as no discernible benefits are expected from a high level of regional management autonomy, its negative influence on a firm's regional performance largely remains.…”

“…Bounded reliability of national subsidiaries is influenced by their distance to the incentive systems of corporate headquarters, including immediate sanction and reward systems, as well as monitoring and controlling mechanisms (Verbeke and Kenworthy 2008). Thus, bounded reliability explains how the importance of regional management might be influenced by the geographical proximity to corporate headquarters (Yeung et al 2001).…”

“…In light of a high geographic distance, increases in regional decision-making responsibilities have been found to be important to effectively explore regional markets (Yeung et al 2001). In addition, it has been shown that autonomous management is related to regional performance effects, if it leads to a better linkage of a MNC's institutional distance to its resources and structures (Venzin et al 2008), reducing its liability of foreignness (Miller and Richards 2002).…”

Toward a Theory of Regional Organization

“…although there are a growing number of papers stressing the value of a regional strategy (e.g., Ghemawat 2003;Rugman and Verbeke 2004;Yeung et al 2001), only a few address the issue from the aspect of organizational adjustment to fit a regional strategy. In these works, most recommendations are to set up a regional headquarters.…”

“…the world is not fully integrated, but, by moving towards regionalization, it is in a state of semi-globalization (Ghemawat 2003). For MNCs, it is strategically important to have a stronghold in each one of the triads (Ohmae 1985;Rugman and Verbeke 2004;Yeung et al 2001).…”