Why do some multinational corporations relocate their headquarters overseas?

Abstract

This paper examines the decision by a multinational corporation (MNC) to relocate its business unit and/or corporate HQ overseas. We argue that business unit HQs move overseas in response to changes in the internal configuration of their unit's activities and the demands of the product markets in which they operate, whereas corporate HQs move overseas in response to the demands of external stakeholders, in particular global financial markets and shareholders. Using data onThis paper examines the decision by a multinational corporation (MNC) to locate its corporate or business unit headquarters overseas. It is concerned with understanding the factors that lead the executives of the MNC to shift their headquarters away from the traditional home country of operation, and in particular how the drivers for corporate HQ relocation are different from the drivers of business unit HQ relocation. The study is motivated by three lines of argument.First, the research contributes to our understanding of the role of the corporate HQ in the multibusiness firm. There is a well-established distinction in the strategic management literature between Keywords: multinational corporation; headquarters; corporate strategy; internationalization * Correspondence to: Julian Birkinshaw, London Business School, Regent's Park, London NW1 4SA, U.K. E-mail: jbirkinshaw@london.edu business unit strategy (concerned with the competitive positioning of a business within its chosen industry domain) and corporate strategy (which defines the scope of businesses in which the firm participates, and the ways in which value is added across those businesses; Bourgeois, 1980;Chandler, 1991;Hofer and Schendel, 1978). Research has examined the differences between these two levels of analysis, in terms of the content of strategy and the process of strategy-making. The current research continues in this tradition by focusing on the different roles of business unit and corporate HQs in a multinational corporation, and in particular on their relationships with various internal and external stakeholders. By examining the drivers of HQ relocation decisions, we are able to show that business unit HQs move overseas in response to changes in the internal configuration of their unit's activities and the demands of the product markets in which they operate, whereas corporate HQs move overseas in response to the demands of external stakeholders, in particular global financial markets and shareholders. This externally facing role is potentially an important addition to our understanding of the role of the corporate HQ in the multi-business firm (cf. Chandler, 1991;Foss 1997;Goold, Campbell, and Alexander, 1994).Second, geographical location affects firm competitiveness, so any decision to relocate specific activities overseas is potentially very important to the future success of the MNC. There are wellestablished theories of agglomeration in the literature, and it is now accepted that proximity to specialized labor, complementary suppliers and customers, and access to ...

Beyond Simple Configurations: The Dual Involvement of Divisional and Corporate Headquarters in Subsidiary Innovation Activities in Multibusiness Firms

“…We contribute to extant literature in several distinct ways. First, we contribute to the literature on parenting in complex structures (e.g., Ambos and Mueller-Stewens 2016;Birkinshaw et al 2006;Foss et al 2012;Poppo 2003) in explicating circumstances under which we can expect to observe overlapping headquarters' involvement. We theorize on network related aspects (i.e., intra-/ inter-divisional embeddedness and network size) of organizational complexity, and how this is related to dual headquarters involvement.…”

“…By questioning the overly simplistic views of the headquarters of the multibusiness firm, this paper contributes to the emerging literature on parenting in complex structures (e.g., Birkinshaw et al 2006;Foss et al 2012;Poppo 2003;Galbraith 2009). A key feature of the innovation development process is the network embeddedness of the firm hosting the development.…”

“…First, we contribute to the literature on parenting in complex structures (e.g. Birkinshaw et al 2006;Foss et al 2012;Galbraith 2009;Kostova et al 2016;Poppo 2003). This literature predicts that dual headquarters involvement is unlikely to occur since it is costly and draws on the scarce resources and attention of headquarters staff Nell et al 2011;Poppo 2003), since it runs counter the traditional M-form logic (Chandler 1991;Verbeke and Kenworthy 2008;Williamson 1975), and because it increases the likelihood of conflicts and coordination problems (Goold and Campbell 2002;Gong et al 2007).…”

“…Goold and Campbell (2002) are among the first to highlight that parenting in complex organizations usually goes hand in hand with a more complex structure of parenting itself. For example, in complex organizations, parenting activities are often allocated to several headquarters (Alfoldi et al 2012;Birkinshaw et al 2006;Nell et al 2017) or even to subsidiaries (e.g., Centers of Excellence, cf., Frost et al 2002). Furthermore, complex organizations experience that multiple headquarters simultaneously interact with a particular subsidiary when they attempt to add value.…”

The strategic location of regional headquarters for multinationals in Africa: south Africa as a host country

“…Whilst the literature examining the importance of location factors for FDI is rich, much less is understood about how the location decisions for RHQs are made or integrated this into a theoretical framework (Birkinshaw, Braunerhjelm, Holm, & Terjesen, 2006;Laamanen, Simula, & Totstila, 2012). At a fundamental level, Holt et al (2000) fi nd nine dimensions used by multinational organizations in selecting the location of RHQs: favorable government incentives; low operating costs; low living costs; favorable fi nancial environment; effective regional links; compatibility with home base; supportive business environment; economic IT infrastructure; and favorable employment relations.…”