Headquarters on the move: A dissertation on HQ mobility
Over the last years, we have witnessed an increased mobility of headquarters (HQs) that have started to relocate across borders. This trend has not only been enabled by globalization (i.e., an increasing international involvement of firms) but also by recent deglobalization processes (such as increasing geopolitical uncertainties around events such as the Brexit referendum or the Catalan independence movement). For example, the European HQ of the Russian VTB Bank was recently relocated from Vienna, Austria to Frankfurt, Germany, whereas the British low-cost carrier EasyJet decided to move its European HQ from the UK to Vienna. But what drives multinational corporations to relocate their HQs, how do they design the relocation process, and what are the outcomes of the HQ relocations?
In his dissertation, Jan Schmitt investigates those questions with four different studies and yields several important insights. First, an extensive data collection of HQ relocations in Europe between 2000 and 2019 revealed that there is an emerging trend towards reconsidering the location choices of HQs, especially for intermediary HQ structures (such as regional and divisional HQs) as well as individual HQ activities (such as the top management team as an important part of the HQ). This trend can especially be observed in times of major exogeneous shocks (such as the global financial crisis or Brexit).
Second, the motivations for cross-border HQ relocations are more diverse than often assumed. Despite their important role, tax considerations do not fully explain the occurrence of HQ relocations. Indeed, the findings highlight that there are multi-level drivers for HQ relocations. For instance, the composition of the top management team, internal distances between the HQ and subsidiaries, the overall firm performance, and the national governance systems collectively affect the likelihood of an HQ relocation.
Finally, relocating an HQ across borders is a highly innovative and powerful organizational tool to deal with very common organizational issues within multinational corporations, such as a lack of local business knowledge and a lack of HQ value-added. The outcomes of HQ relocations, however, are more diverse than expected. By relocating their HQs, organizations are able to impact the mindset of their HQ managers, the vertical as well as horizontal relationships within the firm, the performance of firm units and the entire firm, and the relationships to external stakeholders. Hence, HQ relocations represent an innovative undertaking for firms to achieve a multitude of outcomes, and they may even replace or complement some more established organizational tools, such as extensive business traveling or the use of expatriates.
Overall, the dissertation can help policy-makers in formulating and implementing promising policies through which they can attract more HQs or avoid a loss of HQs. This is crucial, because the attraction of an HQ is associated with benefits for the economy regarding the availability of high value-adding jobs, tax income, and the opportunity to influence economic activity in direct discourse with HQ managers. Managers might also be able to benefit from these insights, as they will be able to develop a holistic understanding of HQ relocations and derive how they can make use of and benefit from HQ relocations as a new organizational tool.
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