Mobility of corporate headquarter functions: A literature review

This paper reviews the recent literature on the relocation of headquarters (HQs). Overall results show that full and direct international relocations of corporate HQs are rare events. However, there is a trend that MNEs increasingly unbundle their HQs so as to spread their different HQs functions over several locations around the world. The literature on the organisation of companies shows that HQ unbundling can go hand in hand with different patterns of HQ relocations. The international trade literature underlines that falling communication costs enable firms to offshore HQ-tasks that were previously considered nontraded. International competition occurs now between individual workers performing similar HQ-tasks in different nations. The new economic geography literature explains the spatial concentration of HQs functions by the existence of agglomeration effects. Most empirical literature focuses on relocations within the United States. Relocations within the EU are less frequent which may be explained by legal and cultural barriers. An important finding is that many HQ relocations result from a merger or acquisition, but institutional factors, such as international tax incentives and labour market institutions, were also identified as key drivers of HQ relocations. The effects of relocations on the company performance are relatively small although results seem to depend on the motivation behind the relocation. For nations, the unbundling of HQs implies that the competition between (potential) locations for HQ functions will rise.