Why do multinational corporations relocate core parts of their corporate headquarters abroad?

Publicatiedatum: 02-2015
Gepubliceerd in: Long Range Planning, 48(1): 46-58
Auteurs: M.G. Baaij; T.J.M. Mom; F.A.J. van den Bosch; H.W. Volberda

Abstract:

This paper examines relocations of core parts of corporate headquarters (CHQ) to alternative host countries. Although previous studies have indicated that international relocations of corporate headquarters are on the rise, research into this phenomenon is scarce. Current research on CHQ relocations focuses on the headquarters as a whole. In this study, we adopt a more fine-grained perspective by distinguishing CHQ core parts; i.e. executive team members, CHQ core staff functions and the corporate legal seat. By investigating relocations of each of these core parts we create more insights into the extent to which multinational corporations (MNCs) are relocating CHQ core parts abroad, and into what drives and motivates MNCs to do so.

Drawing on a sample of 58 of the 100 largest Dutch MNCs, we find, first, that MNCs are moving their CHQ core parts abroad to an increasing extent. Only the corporate legal seat still tends to be kept “at home”, which explains why the “hollowing out” of CHQs in the MNC’s home country is difficult for outsiders to observe. Second, we find that different CHQ core parts have different relocation drivers. We identify and investigate relocation drivers and associated strategic benefits related to two main categories of drivers: (1) an increase in the degree to which the MNC is internationalised; and (2) a decrease in the perceived attractiveness of the home country to the MNC. Strategic benefits for MNCs of moving their CHQ core parts overseas include: (a) better quality communication and knowledge exchange with overseas strategic stakeholders; (b) access to higher quality international strategic resources, including capital, talent and services clusters; and (c) access to a lower-cost fiscal regime and a higher quality legal and regulatory regime

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