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Distant Encounters of the Third Kind: Multinational Companies Locating Divisional Headquarters Abroad

Gabriel Benito (), Randi Lunnan and Sverre Tomassen

Journal of Management Studies, 2011, vol. 48, issue 2, 373-394

Abstract: We examine the location and relocation abroad of divisional headquarters of companies originating in a small country on the periphery of Europe. While the internationalization of business activities has been extensively studied for more than four decades, there is limited research on the strategic decision to locate divisional headquarters outside the home country. Our study shows a massive movement of headquarters functions between 2000 and 2006. Building on agency, resource based, and institutional perspectives, we propose that such moves are driven by efficiency/effectiveness as well as legitimacy factors. We find that state ownership and ownership concentration discourage MNCs from moving headquarters activities abroad, but national ownership does not. We also find that while MNCs may move their divisional headquarters to gain efficiency by co‐locating with foreign subsidiaries, they keep them at home when the company becomes large, highly diversified and complex to manage.

Date: 2011
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Handle: RePEc:bla:jomstd:v:48:y:2011:i:2:p:373-394