Why do some MNCs relocate
their headquarters overseas?
Julian Birkinshaw, LBS
Pontus Braunerhjelm, SNS
Ulf Holm, Uppsala
Siri Terjesen, LBS
Motivation for paper
• Increasing number of cases of MNCs moving HQs
activities overseas – Ericsson, BHP-Billiton,
Massey-Ferguson
• No prior studies of corporate HQ moving
overseas
• Important implications for practice, and for the
theory of the MNC
• Guiding question: How can we explain the
internationalization of corporate HQs?
Background
• Literature on the role of the corporate HQ in the
multi-business corporation
– Corporate HQ often viewed as “middleman” between
business units and capital markets
• Definition of corporate HQ: consists of three
elements
– Legal entity
– Top management team
– Corporate functions (treasury, investor relations etc)
– Increasingly these three elements are not co-located
Traditional arguments for
relocating corporate HQ overseas
• Evolutionary process - corporate HQ
follows other activities overseas
• Location-specific factors – corporate HQ
location depends on relative attractiveness
of potential host countries
• Situation-specific reasons – merger, tax
reasons etc.
Our argument for relocating
corporate HQ overseas
• Corporate HQ sits between business units and external
stakeholders (shareholders, customers, competitors)
• Historically, HQ co-located with business units
• Increasing globalization – corporate HQs more influenced
by relative importance of internal and external stakeholders
Business
Units
Corp.
HQ
External
stakeholders
Organization theory perspectives
• Resource dependency theory: Corporate HQ may
move closer to major commercial centres to
reduce their dependency on specific actors
• Institutional theory: Corporate HQ may move to
signal its membership of a global industry group
• These theories provide complementary
perspectives on underlying reasons why corporate
HQ may move overseas
Hypotheses
H1. The greater the percentage of business unit activities overseas (sales,
mfg, R&D), the more international the corporate HQ will be
H2. The less attractive Sweden is perceived as a location for corporate
HQ, the more international corporate HQ will be
H3. The greater the international influence from shareholders (stock
listings, % foreign) the more international corporate HQ will be
H4. The greater the international influence from customers (% outside
Sweden, % outside Europe), the more international corporate HQ will
be
H5. The greater the international influence from competitors (% outside
Sweden, % outside Europe), the more international corporate HQ will
be
Research Methods & Data
• Focused on largest 40 “Swedish” MNCs, 35
participated in the study
• Detailed questionnaire filled in, plus secondary
data on shareholders, customers etc.
• HQ internationalization measured using
– Categorical measure of legal domicile (6 of 35
overseas)
– Continuous measure – combination of % functional
activities outside Sweden, % HQ employees outside
Sweden, % top management and board non-Swedish
Results – correlates of HQ internationalization
• Some support for H1
– Percent R&D units abroad significant (r=.45), but percent sales and
manufacturing not significant
• No support for H2
– Quality of Swedish government, Swedish cluster, taxation all nonsignificant
• Strong support for H3
– Overseas listing, number of exchanges, % foreign shareholders all
significant (r=.38, r=.41, r=.42)
• Strong support for H4
– Sales outside Sweden, outside Europe both significant (r= .52, r=.46)
• Some support for H5
– Percentage competitors outside Sweden significant (r=.41)
Results – multivariate analysis
Predictors of HQ internationalization
Sales volume
(control)
-.192
Percent foreign
shareholders
.465**
Primary exchange
abroad
.394*
Sales outside
Sweden
.309†
Competitors
outside Sweden
-.155
R-squared /
Adjusted
.57 / .48
F
6.63***
Discussion / Conclusions
• Good support for argument that corporate
HQ moves overseas in response to external
influences
• Little support for traditional logic that HQ
follows business activities overseas, or for
purely locational reasons
• Need to extend this research to consider the
relatedness of the corporation