The location of headquarters: Why, when and where are regional mandates located?

Research output: ThesisDoctoral ThesisCollection of Articles

Abstract

The location and relocation of headquarters have significant managerial and policy implications as they may bring considerable cost savings for multinational enterprises, and create high-value-added jobs and enhance the reputation of host countries. Regional headquarters (RHQ) mandates constitute an ideal context in which to study these locational dynamics, as they are easy to relocate from one subsidiary to another. However, it is not clear why, when and where subsidiaries have RHQ mandates.  The thesis begins by developing a theoretical framework containing the most critical host country, multinational enterprise, and focal subsidiary determinants of RHQ location. The thesis argues that it is necessary to understand the different stages of locational dynamics, including mandate possession, loss and relocation. The empirical part of the work consists of three essays, each of which examines one stage from a different theoretical perspective. Essay 1 draws on contingency theory to examine subsidiaries' possession of RHQ mandates; Essay 2 draws on the concept of absorptive capacity to explain the full and partial loss of RHQ mandates; and Essay 3 employs the notion of liability of foreignness to investigate the relocation of RHQ mandates.  The empirical investigation draws on two unique datasets and focuses on Finnish subsidiaries with RHQ mandates. Located between East and West, Finland attracted many RHQ in the 1990s, but a recent study suggests that RHQ are now more likely to be located in Sweden or Denmark. Finland thus provides an excellent empirical context to examine the locational dynamics of RHQ mandates, especially with regard to loss and relocation.  The findings highlight the important role of RHQ in sales and distribution. Essay 1 finds that subsidiaries are more likely to possess RHQ mandates if they have strong business relationships with local buyers. Essay 2 reveals that full mandate loss is associated with RHQ's small size and lack of sales focus, whereas partial mandate loss is prompted by challenging conditions within the RHQ's mandated markets. Essay 3 confirms that RHQ are likely to be relocated geographically closer to mandated markets even if the new host country has investment restrictions. RHQ's role in sales and marketing prompts location close to large distributors and retailers, many of which are located in Sweden and Denmark, rather than Finland's export-led production companies.  The thesis is amongst the first large-scale study to systematically examine headquarters' locational dynamics. Although the above findings are specific to subsidiaries with RHQ mandates, which are typically market- or efficiency-seeking units, the theoretical framework of this thesis is also applicable to other types of headquarters. It reinforces the significance of investment motives, local business relationships, focal-subsidiary capabilities and geographic scope to headquarters' location, providing insights for both theory and policy.
Translated title of the contributionPääkonttoreiden sijainti: miksi, milloin ja mihin aluepääkonttorimandaatit sijoitetaan?
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
Supervisors/Advisors
  • Piekkari, Rebecca, Supervising Professor
  • Piekkari, Rebecca, Thesis Advisor
  • Scott-Kennel, Joanna, Thesis Advisor, External person
  • Rose, Elizabeth L., Thesis Advisor
Publisher
Print ISBNs978-952-60-7939-4
Electronic ISBNs978-952-60-7940-0
Publication statusPublished - 2018
MoE publication typeG5 Doctoral dissertation (article)

Keywords

  • regional headquarters
  • regional mandates
  • headquarters
  • location

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