Skip to main content
SpringerLink
Log in

Beijing or Shanghai? The strategic location choice of large MNEs’ host-country headquarters in China

  • Research Note
  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

We argue that a multinational enterprise’s (MNE’s) location choice for its host-country headquarters (HCHQ) in the geographic space of the host country is determined by the interplay between the strategic roles of HCHQ in the organizational space of the MNE and the institutional space external and internal to the MNE. We focus on the location choice between Beijing and Shanghai. We test our arguments using data for a sample of Fortune Global 500 corporations in China (1979–2005). This study contributes to international business (IB) research by reinvigorating research on HCHQ. We also complement economic geography research on subnational agglomeration by using an IB perspective with a focus on the institutional idiosyncrasies of cities.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. We thank our editors, Professor Beugelsdijk and Professor Mudambi, for this suggestion.

References

  • Anderson, G., & Ge, Y. 2005. The size distribution of Chinese cities. Regional Science and Urban Economics, 35 (6): 756–776.

    Article  Google Scholar 

  • Bel, G., & Fageda, X. 2008. Getting there fast: Globalization, intercontinental flights and location of headquarters. Journal of Economic Geography, 8 (4): 471–495.

    Article  Google Scholar 

  • Benito, R. G., Lunnan, R., & Tomassen, S. 2011. Distant encounters of the third kind: Multinational companies locating divisional headquarters abroad. Journal of Management Studies, 48 (2): 373–394.

    Google Scholar 

  • Beugelsdijk, S., & Mudambi, R. 2013. MNEs as border-crossing multi-location enterprises: The role of discontinuities in geographic space. Journal of International Business Studies, 44 (5): 413–426.

    Article  Google Scholar 

  • Beugelsdijk, S., McCann, P., & Mudambi, R. 2010. Place, space and organization: Economic geography and the multinational enterprise. Journal of Economic Geography, 10 (4): 485–493.

    Article  Google Scholar 

  • Birkinshaw, J., Braunerhjelm, P., Holm, U., & Terjesen, S. 2006. Why do some corporations relocate their headquarters overseas? Strategic Management Journal, 27 (7): 681–700.

    Article  Google Scholar 

  • Buckley, P. J., Devinney, T. M., & Louviere, T. J. 2007. Do managers behave the way theory suggests? A choice-theoretic examination of foreign direct investment location decision-making. Journal of International Business Studies, 38 (7): 1069–1094.

    Article  Google Scholar 

  • Chandler, A. 1991. The functions of the HQ unit in the multibusiness firm. Strategic Management Journal, 12 (8): 31–50.

    Article  Google Scholar 

  • Davis, J., & Henderson, J. V. 2008. The agglomeration of headquarters. Regional Science and Urban Economics, 38 (5): 445–460.

    Article  Google Scholar 

  • Enright, M. J. 2005. The roles of regional management centers. Management International Review, 45 (1): 83–100.

    Google Scholar 

  • Fujita, M., Krugman, P., & Venables, A. J. 1999. The spatial economy: Cities, regions and international trade. Cambridge, MA: MIT Press.

    Google Scholar 

  • Gabaix, X. 1999. Zipf’s law for cities: An explanation. Quarterly Journal of Economics, 114 (3): 739–767.

    Article  Google Scholar 

  • Ghemawat, P. 2001. Distance still matters: The hard reality of global expansion. Harvard Business Review, 79 (8): 137–147.

    Google Scholar 

  • Giesen, K., & Südekum, J. 2011. Zipf’s law for cities in the regions and the country. Journal of Economic Geography, 11 (4): 667–686.

    Article  Google Scholar 

  • Goerzen, A., Asmussen, C. G., & Nielsen, B. B. 2013. Global cities and multinational enterprise location strategy. Journal of International Business Studies, 44 (5): 427–450.

    Article  Google Scholar 

  • Gwartney, J., Holcobe, R., & Lawson, R. 1998. The scope of government and the wealth of nations. The CATO Journal, 18 (2): 163–190.

    Google Scholar 

  • Henisz, W. J. 2003. The power of the Buckley and Casson thesis: The ability to manage institutional idiosyncrasies. Journal of International Business Studies, 34 (2): 173–184.

    Article  Google Scholar 

  • Hofstede, G. H. 2001. Culture’s consequences: Comparing values, behaviors, institutions, and organizations across nations. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Holburn, G. L. F., & Zelner, B. A. 2010. Political capabilities, policy risk, and international investment strategy: Evidence from the global electric power generation industry. Strategic Management Journal, 31 (12): 1290–1315.

    Article  Google Scholar 

  • Howlett, M. 2002. Understanding national administrative styles and their impact upon administrative reform: A neo-institutional model and analysis. Policy, Organisation & Society, 21 (1): 1–24.

    Article  Google Scholar 

  • Kogut, B., & Singh, H. 1988. The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19 (3): 411–432.

    Article  Google Scholar 

  • Lee, L. 1983. Generalized econometric models with selectivity. Econometrica, 51 (2): 507–512.

    Article  Google Scholar 

  • Li, C. 1996. Rediscovering urban subcultures: The contrast between Shanghai and Beijing. The China Journal, 36 (July): 139–153.

    Article  Google Scholar 

  • Lin, C., & Png, I. 2003. Monitoring costs and the mode of international investment. Journal of Economic Geography, 3 (3): 261–274.

    Article  Google Scholar 

  • Lorenzon, M., Mauer, I., & Staber, U. 2012. Space and inter-organizational relations. Industry and Innovation, 19 (3): 181–186.

    Article  Google Scholar 

  • Lovely, M. E., Rosenthal, S. S., & Sharma, S. 2005. Information, agglomeration and the headquarters of US exporters. Regional Science and Urban Economics, 35 (2): 167–191.

    Article  Google Scholar 

  • Lu, J. W., & Ma, X. 2008. The contingent value of local partners’ business group affiliations. Academy of Management Journal, 51 (2): 295–314.

    Article  Google Scholar 

  • Luo, Y. 2007. From foreign investors to strategic insiders: Shifting parameters, prescriptions and paradigms for MNCs in China. Journal of World Business, 42 (1): 14–34.

    Article  Google Scholar 

  • Ma, X., & Delios, A. 2007. A new tale of two cities: Japanese FDIs in Shanghai and Beijing, 1979–2003. International Business Review, 16 (2): 207–228.

    Article  Google Scholar 

  • Ma, X., & Delios, A. 2010. Host-country headquarters and an MNE’s subsequent within-country diversifications. Journal of International Business Studies, 41 (3): 517–525.

    Article  Google Scholar 

  • Ma, X., Tong, T., & Fitza, M. 2013. How much does subnational region matter to foreign subsidiary performance? Evidence from Fortune Global 500 Corporations’ investment in China. Journal of International Business Studies, 44 (1): 66–87.

    Article  Google Scholar 

  • Mariotti, S., & Piscitello, L. 1995. Information costs and location of FDIs within the host country: Empirical evidence from Italy. Journal of International Business Studies, 26 (4): 815–836.

    Article  Google Scholar 

  • McCann, P., & Mudambi, R. 2005. Analytical differences in the economics of geography: The case of the multinational firm. Environment and Planning A, 37 (10): 1857–1876.

    Article  Google Scholar 

  • McGahan, A. M., & Victer, R. 2010. How much does home country matter to corporate profitability? Journal of International Business Studies, 41 (1): 142–165.

    Article  Google Scholar 

  • Meyer, K. E., Mudambi, R., & Narula, R. 2011. Multinational enterprises and local contexts: The opportunities and challenges of multiple-embeddedness. Journal of Management Studies, 48 (2): 236–252.

    Google Scholar 

  • NBSC. 2004. China’s top 100 cities in comprehensive strength. Beijing: National Bureau of Statistics of China.

  • Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review, 16 (1): 145–179.

    Article  Google Scholar 

  • Porter, M. E. (Ed) 1986. Competition in global industries: A conceptual framework. In Competition in global industries. Boston: Harvard Business School Press, pp. 15–60.

    Google Scholar 

  • Redfield, R., & Singer, M. 1954. The cultural role of cities. Economic Development and Cultural Change, 3 (1): 53–73.

    Article  Google Scholar 

  • Sassen, S. 2006. Cities in a world economy, 3rd edn. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Schlevogt, K. 2001. Institutional and organizational factors affecting effectiveness: Geoeconomic comparison between Shanghai and Beijing. Asia Pacific Journal of Management, 18 (4): 519–551.

    Article  Google Scholar 

  • Slangen, A. H. L. 2011. A communication-based theory of the choice between greenfield and acquisition theory. Journal of Management Studies, 48 (8): 1699–1926.

    Article  Google Scholar 

  • Soo, K. 2005. Zipf’s law for cities: A cross-country investigation. Regional Science and Urban Economics, 35 (3): 239–263.

    Article  Google Scholar 

  • Xu, D., & Shenkar, O. 2002. Institutional distance and the multinational enterprise. Academy of Management Review, 27 (4): 608–618.

    Google Scholar 

  • Yeung, W. Y. 2005. Organizational space: A new frontier in international business strategy? Critical Perspective on International Business, 1 (4): 219–240.

    Article  Google Scholar 

  • Yip, G. S. 1995. Total global strategy. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Zipf, G. K. 1949. Human behaviour and the principle of least effort. Reading, MA: Addison-Wesley.

    Google Scholar 

  • Zou, S., & Cavusgil, T. 2002. The GMS: A broad conceptualization of global marketing strategy and its effect on firm performance. Journal of Marketing, 66 (4): 40–56.

    Article  Google Scholar 

Download references

Acknowledgements

We would like to thank our editors and the anonymous reviewers for their valuable comments. This study was supported by two grants from the Research Grants Council of the Hong Kong Special Administrative Region (Projects No. CUHK451311 and CUHK4012-PPR-10).

Author information

Authors and Affiliations

  1. Department of Management, The Chinese University of Hong Kong, New Territories, Hong Kong

    Xufei Ma & Chung-Ming Lau

  2. Department of Strategy and Policy, NUS Business School, National University of Singapore, Singapore

    Andrew Delios

Authors
  1. Xufei Ma
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Andrew Delios
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Chung-Ming Lau
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Xufei Ma.

Additional information

Accepted by Ram Mudambi and Sjoerd Beugelsdijk, Guest Editors, 28 July 2013. This paper has been with the authors for three revisions.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Ma, X., Delios, A. & Lau, CM. Beijing or Shanghai? The strategic location choice of large MNEs’ host-country headquarters in China. J Int Bus Stud 44, 953–961 (2013). https://doi.org/10.1057/jibs.2013.49

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/jibs.2013.49

Keywords

Search

Navigation