Changes at Corporate Headquarters: Review, Integration and ... · Changes at Corporate Headquarters locations and relationships with subsidiaries (e.g. Kramer 1999; Kunisch et al

© 2014 British Academy of Management and John Wiley & Sons Ltd. Published by John Wiley & Sons Ltd, 9600 GarsingtonRoad, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

International Journal of Management Reviews, Vol. 17, 356–381 (2015)DOI: 10.1111/ijmr.12044

Changes at Corporate Headquarters:Review, Integration and Future Research

Sven Kunisch, Markus Menz and Björn AmbosUniversity of St. Gallen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland

Corresponding author email: [email protected]

In modern corporations, the corporate headquarters (CHQ) unit is consideredcentral to the fortunes of the overall firm. In light of ever-changing environments,changes at the CHQ have become a crucial concern in management research andpractice, and scholars have studied a variety of changes at the CHQ. Despite thecommon focus on the CHQ entity and the potential for cross-fertilization acrossseveral research tracks, a coherent picture of this dispersed body of knowledge islacking. This paper reviews 25 years of research on changes at the CHQ. In so doing,it advances a common language and an overarching framework that integrates theexisting knowledge in the intellectual domains of strategy, organizational design andinternational business research. On this basis, the authors suggest directions forfuture research to advance knowledge of: (1) the pressure for and resistance tochanges at the CHQ; (2) interrelationships among changes at the CHQ; (3) changeprocesses at the CHQ; (4) agents involved in changes at the CHQ; and (5) adaptiveand disruptive effects of changes at the CHQ. Overall, the study provides a concep-tual basis for combining the existing knowledge of changes at the CHQ and serves asa guide for future research.

Introduction

With the emergence of the modern corporation(Chandler 1962; Melman 1951; Sloan 1964), the cor-porate headquarters (CHQ) unit has taken centrestage with respect to the fortunes of the overall firm(e.g. Chandler 1991; Collis et al. 2007; Gooldand Campbell 1987). As firms are faced with ever-changing internal and external environments, schol-ars and practising managers have become highlyinterested in changes at the CHQ (e.g. Economist

2008, 2014; Ferlie and Pettigrew 1996). However,despite the considerable importance of research onchanges at the CHQ and the increasing amount ofscholarly work in this field, we lack a systematicreview that synthesizes the dispersed body ofknowledge.

The existing studies have contributed to severalresearch streams, including research focused onstrategy, organization, international business andagglomeration. Initial research on changes at theCHQ was probably fuelled by observations that thesize of the CHQ changed significantly during the late1980s and early 1990s (e.g. Ferlie and Pettigrew1996) and that a considerable number of large firmswere moving their CHQs to new locations (e.g. Baaijet al. 2004; Strauss-Kahn and Vives 2009; Voget2011). Yet, cases and trend data demonstratethat changes at the CHQ have become frequent,multifaceted phenomena that span a variety ofCHQ characteristics, such as structures, activities,

The authors thank the Editor Caroline Gatrell, the AssociateEditor Thomas Baker and the anonymous reviewers for theguidance and the valuable comments throughout the reviewprocess. The authors are grateful to Michael Boppel,Andrew Campbell, David J. Collis, Steven W. Floyd, TomiLaamanen, Sebastian Raisch, Metin Sengul and Carola Wolffor their very helpful feedback on earlier versions of themanuscript.

Changes at Corporate Headquarters

locations and relationships with subsidiaries (e.g.Kramer 1999; Kunisch et al. 2012; Young et al.2000). It thus comes as no surprise that scholars haveinvestigated a broad range of phenomena in the lastdecade, such as changes in the CHQ’s roles (e.g.Grant 2003), changes in CHQ–subsidiary relation-ships (e.g. Ambos et al. 2010; Ambos et al. 2011;Joseph and Ocasio 2012) and changes in the CHQ’slocation (e.g. Baaij et al. 2012a,b; Birkinshaw et al.2006; Laamanen et al. 2012).

Although the existing studies explore a variety ofchanges at the CHQ, they all share a common focuson the CHQ as an entity that fulfils various roles andrepresents the location of the firm’s legal entity(e.g. Birkinshaw et al. 2006; Collis et al. 2007). Tocapture the wide scope of these studies, we adopt abroad definition of ‘changes at the CHQ’ as altera-tions in the state or quality of the attribute(s) of theCHQ entity over time. An alteration in the state of theCHQ refers to a shift in particular CHQ conditionsbetween two specific points in time (e.g. changes inthe number of CHQ staff or changes in the CHQ’slocation). Such alterations can be understood as dis-crete changes. An alteration in the quality of theCHQ refers to a change in a distinctive attribute ofthe CHQ (e.g. changes in the CHQ’s capabilities).Such alterations can be understood as continuouschanges. Using ‘changes at the CHQ’ as an umbrellaterm avoids unnecessarily restricting the scope of thestudy, and directs us to classify the literature withrespect to the characteristics of the CHQ entity. Thisapproach is appropriate for this study’s purpose andcomparable to that found in similar studies (e.g.Ginsberg 1988).

While an understanding of the various phenomenais in itself a good reason for scholarly investigationof changes at the CHQ (e.g. Birkinshaw et al. 2006;Ferlie and Pettigrew 1996), research in this area isvital for at least two additional reasons. First, studiesof changes at the CHQ can enhance scholarly under-standing of the functioning of the CHQ, which is acentral component in many theories of the firm(Kleinbaum and Stuart 2014; Menz et al. 2013). Theuse of a change perspective provides an alternativeway to explore phenomena even when the primaryfocus is on non-temporal issues (Ancona et al. 2001,p. 660). For example, Birkinshaw et al. (2006,p. 697) revealed the importance of the CHQ’s exter-nally oriented role by showing that CHQs move over-seas ‘as a response to the perceived demands andopportunities offered by overseas shareholders andcapital markets’. Second, the CHQ offers a compel-

ling context in which to study strategic andorganizational change. For example, changes at theCHQ hold significant symbolic value for internal andexternal stakeholders (e.g. Laamanen et al. 2012),and such changes tend to embody organizationalchange in general (e.g. van Marrewijk 2009). Thus,studies of the conditions that enable or hinderchanges at the CHQ can advance scholars’ under-standing not only of the CHQ in particular, but alsoof organizational change in general.

Despite the importance of research on changes atthe CHQ, the existing knowledge has evolved onseveral parallel, albeit related, research tracks thatcover different characteristics of the CHQ. Giventheir common focus on the CHQ entity, theseresearch tracks harbour the potential for cross-fertilization and need to be combined in order toadvance the cumulative knowledge of changes at theCHQ. The main purpose of this paper, therefore, is toconsolidate the dispersed insights of previous studieson changes at the CHQ.

Based on a comprehensive review of 25 years ofresearch into changes at the CHQ, we summarizethe body of knowledge and propose an integrativeframework that not only allows for cross-fertilization,but also serves as a basis for future research. Specifi-cally, we identify three interrelated research domains.Each of these domains has distinct research foci thatcould be transferred to research in the other domains.Based on these general findings, we suggest direc-tions for future research in line with the integrativeframework to advance knowledge of: (1) the pressurefor and resistance to changes at the CHQ; (2) interre-lationships among changes at the CHQ; (3) changeprocesses at the CHQ; (4) agents involved in changesat the CHQ; and (5) adaptive and disruptive effectsof changes at the CHQ. In sum, the study providesa conceptual basis for combining the existingknowledge of changes at the CHQ and serves as aguide for future research.

Methodology

In order to systematically review the extant know-ledge on changes at the CHQ, we follow a struc-tured approach (e.g. Cropanzano 2009; Short 2009;Tranfield et al. 2003; Webster and Watson 2002).Our review includes research published over a spanof 25 years (1987 to 2012). As a starting point, wefocused on two prominent publications related tothe study of changes at the CHQ: Porter’s (1987)

© 2014 British Academy of Management and John Wiley & Sons Ltd.

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S. Kunisch et al.

study of corporate strategy, and Ginsberg’s (1988)study of measuring and modelling strategic change.This starting point coincides with two influentialbooks on the topic written by Goold and Campbell(1987) and Pettigrew (1985), which we include inthe formal review. Furthermore, the starting pointroughly coincides with the beginning of an unprec-edented era of globalization (Roth 2011). Since1987, many companies have not only diversifiedtheir products but also entered new geographicalmarkets – a trend that is believed to result inchanges at the CHQ (e.g. Baaij et al. 2012a,b;Ferlie and Pettigrew 1996).

The process of finding studies for the reviewinvolved two main steps. First, we identified relevantpublications in academic and practice-oriented jour-nals. We searched the EBSCOHost Business SourcePremier and the ISI Web of Knowledge databases,which provide access to the leading journals.We considered all journals with 2011 ISI JournalCitation Report impact factors of more than 0.5 inthe categories of Area Studies, Business, Businessand Finance, Economics, Geography, Management,Planning and Development, and Urban Studies. Forthe search, we used several synonyms for ‘CHQ’ and‘change’. Scholars have used a variety of terms whendescribing and analysing the CHQ (cf. Menz et al.2013), including ‘strategic apex’ (Mintzberg 1979),‘central administrative office’ (Aarland et al. 2007;Davis and Henderson 2008; Montague 1986), ‘cor-porate centre’ (Baaij et al. 2004; Hansen and Peytz1991), ‘corporate parent’ (Campbell et al. 1995a,b)and ‘headquarters’ (Henderson and Ono 2008;Strauss-Kahn and Vives 2009). Recently, scholarshave used the term ‘corporate headquarters’(Birkinshaw et al. 2006; Collis et al. 2007, 2012;Foss 1997; Garvin and Levesque 2008; Young et al.2000) to distinguish the headquarters (HQ)of the overall firm from those of business units(BUs) or regional headquarters. Similarly, we usedseveral synonyms for change, including ‘chang*’,‘transform*’, ‘modif*’, ‘restruct*’, ‘redesign*’ and‘relocat*’. We searched for any combination of thetwo sets of synonyms, such as ‘corporate headquar-ter* chang*’, ‘strategic apex restruct*’, ‘corporatecentre relocat*’ and ‘corporate parent transform*’.To ensure that we included all relevant studies, wealso worked forward by searching those studies thatcited the articles identified.

Second, two of the authors manually screened thepublications uncovered in the first step and excludedthose that did not cover changes at the CHQ. To be

included in this review, a study had to deal with sometype of ‘dynamism’ related to the characteristics ofthe CHQ. We adopted a broad definition of ‘dyna-mism’ to avoid unnecessarily restricting the review.We therefore considered works dealing with varioustypes of change, such as radical and incrementalchange, continuous and discrete change, and plannedand unplanned change (e.g. George and Jones 2000;Mintzberg and Westley 1992). As this review focuseson the firm and organizational (unit) levels ratherthan on the individual or team levels, we did notinclude research on corporate-executive turnover.Although corporate executives are an importantelement in CHQ definitions, executive-successionresearch has developed into an independent researchstream (for reviews, see Giambatista et al. 2005;Hutzschenreuter et al. 2012; Kesner and Sebora1994). However, we included research on executivesuccession when it involved other aspects of changeat the CHQ. In addition, because the nature of theCHQ differs greatly from that of divisional HQs (e.g.Birkinshaw et al. 2006), we did not consider researchthat exclusively explored changes at the divisionalHQ level.

This identification process resulted in a finalset of 66 publications. Given the broad scope ofCHQ change phenomena, the research reviewed inthis paper has been published in journals in avariety of fields (for an overview of the journalsand articles, see Figure S1 and Table S1). Thisvariety is also reflected in our analysis of theliterature.

To organize the discussion, we sorted the contri-butions into three domains based on their primaryfocus: (1) the strategy domain, in which the CHQ isreferred to as a corporate-level (or firm-level) entitythat is responsible for the overall firm; (2) theorganizational-design domain, which pertains to thedesign characteristics of the CHQ as a distinctorganizational unit at the top of the corporate hier-archy; and (3) the physical domain, in which theCHQ is referred to as a physical entity with a geo-graphical location (often linked to the location of alegally registered entity). As illustrated in Table 1and described in the literature review, the threedomains differ in their conceptualizations of theCHQ, their main research foci and their measure-ments of changes at the CHQ. In the following, wereview and discuss the studies in each of thedomains, which is an approach similar to that foundin other literature reviews (e.g. Purkayastha et al.2012).


358


Research in the strategy domain

Changes at the CHQ can be conceptualized as stra-tegic changes at the corporate level. The CHQ’smanagement of the overall firm is an importantaspect of a firm’s corporate strategy and its interna-tional strategy. The concepts of corporate strategy(e.g. Goold et al. 1994; Porter 1987) and multina-tional company (MNC) strategy (e.g. Bartlett andGhoshal 1989) typically incorporate two elements:(1) the company’s set of product and regionaldomains; and (2) the CHQ’s management of the setof individual domains. Accordingly, strategic changeat the corporate level occurs along these two ele-ments (e.g. Ginsberg 1988). Changes at the CHQthus reflect strategic choices made at the corporatelevel related to the value-adding strategy. Studies inthis area are broadly concerned with changes in howthe CHQ manages the overall firm, includingchanges in the functions and roles of the CHQ, andchanges in corporate growth strategies. Table 2 sum-marizes the relevant studies in the strategy domain.

Characteristics

An important theme in this domain is the evolutionof the roles and management styles of the CHQ. Overtime, the ‘general office’ (Chandler 1962) and the‘strategic apex’ (Mintzberg 1979) have developedinto the CHQ of today’s large corporations. Based on

his original work (Chandler 1962) and on Goold andCampbell’s (1987) research into the role of the CHQ,Chandler (1991) argues that the CHQ has two basicroles: an entrepreneurial (value-adding) role and anadministrative (loss-preventing) role (see also Foss1997). He also argues that industry characteristicsshape how firms in those industries develop andimplement the two basic CHQ roles. With respect tothe entrepreneurial role, Hungenberg (1993) arguesthat, because the pressure for the CHQ to add valuehas increased, firms need to define an effective rolefor their CHQs, as well as an efficient scope and size.In a similar vein, scholars have explored the evolu-tion of individual CHQ units, such as the strategydepartment. In particular, Grant (2003) studies stra-tegic planning systems and finds that three key roleshave emerged: (a) strategic planning as a context forstrategic decision-making; (b) strategic planning as acoordination mechanism; and (c) strategic planningas a control mechanism.

A common finding in prior research on CHQ rolesis that fundamental changes rarely occur, whileminor changes occur more often. Goold and Luchs(1992), for example, investigate different CHQ man-agement styles and postulate that they rarely change.In a conceptual article focused on CHQ learning,Goold (1994) argues that some types of CHQ learn-ing are fairly easy, while others are difficult or evenimpossible. Specifically, he argues that, as the firmventures into unfamiliar territory, the CHQ finds it

Table 1. Three domains of changes at the CHQ

Strategy domain Organizational-design domain Physical domain

CHQ concept • Strategic entity• Both a unit- and a company-level

concept• Internal and external focus

• Organizational entity• Unit-level concept

• Internal focus (internal alignment)

• Physical/legal entity• Both a unit- and a

company-level concept• External focus

Main concerns • How the CHQ manages the overallcompany– Roles/functions– Styles– Activities

• Organizational design of the CHQ– Informal design (e.g. culture)– Formal design (e.g. structure,

systems)– People (e.g. staffing)

• Physical location of theCHQ– Legal registration of the

firm– Location– Physical buildings

Examples of changes • Corporate management styles• Value-adding strategy (e.g. growth via

M&A vs. organic growth)• Intensity of corporate-level specialism

• Number of CHQ staff, CHQfunctions, CHQ costs

• Level of formalization andcentralization

• Configuration of the CHQ–subsidiaryrelationship

• Location of the CHQ• Number of CHQ locations• CHQ mobility

Exemplary studies • Goold (1994)• Campbell et al. (1995a,b)• Grant (2003)

• Ambos et al. (2010)• Gospel and Sako (2010)• Kleinbaum and Stuart (2014)

• Baaij et al. (2012a,b)• Birkinshaw et al. (2006)• Laamanen et al. (2012)


359

S. Kunisch et al.

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viou

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360


more difficult to learn. The most significant learningchallenges for the CHQ seem to arise in situationswhere deeply held assumptions and beliefs are ques-tioned, and the learning situation simultaneouslyrequires that perceived truths be forgotten, at least tosome extent. Along the same lines, Campbell et al.(1995a, p. 132) claim that good ‘parents constantlymodify and fine-tune their parenting, but fundamen-tal changes in parenting seldom occur, usually onlywhen the chief executive and senior managementteam are replaced’. Moreover, the privileged status ofthe CHQ is believed to shield it ‘from the rigors ofthe market’ (Campbell et al. 1995b, p. 82). Overall,these findings imply a certain amount of inertiaat the CHQ level because fundamental changes inthe CHQ’s value-adding strategy are difficult toimplement.

Antecedents

Changes at the CHQ can be fostered or impeded bychanging and enduring conditions in the firm’sinternal environment. First, and perhaps mostimportantly, changes in the firm’s strategic leader-ship are associated with changes at the CHQ. Mostresearchers agree that fundamental changes at theCHQ only occur when top executives (the CEO ormembers of the top-management team (TMT)) arereplaced. For example, when investigating differentmanagement styles, Goold and Luchs (1992)observe that change occurs only as a result of acrisis, or in conjunction with a new CEO or turn-over in the TMT. Furthermore, Goold et al. (2001)assert that CEO changes lead to a reassessment ofthe roles and composition of the CHQ. An implicitassumption is that CEO and TMT changes serveas adaptation mechanisms that facilitate changesin cognitive orientations and mental models(Wiersema and Bantel 1992, 1993), as well as inthe power structures at the top (e.g. Shen andCannella Jr. 2002). Relatedly, Coulson-Thomas(1992) identifies a lack of TMT commitment and alack of communication skills as major impedimentsto changes in the firm’s vision or mission at theCHQ level.

Second, changes in the corporate portfolio arerelated to changes in CHQ functions and roles. Forexample, Campbell et al. (1995a) suggest that com-panies would rather change their business portfoliosthan their corporate management styles in order toestablish internal fit. This implies that the costs ofchanging the business portfolio are lower than the

costs of changing the CHQ’s parenting style.1 Theseauthors join Goold (1994) in arguing that parentingcharacteristics are based on deeply held values andbeliefs that impede the implementation of change.Overall, the extant research largely focuses onchanges in the firm’s product and market portfolios,while little is known about whether and how changesin the firm’s geographical scope affect the CHQ.

Third, prior performance may affect changes at theCHQ. Specifically, the firm’s prior performance isassociated with strategic change at the CHQ. Asnoted earlier, Goold et al. (1993a,b) suggest thatcompanies rarely change their CHQ managementstyles except when responding to a crisis (e.g.poor firm performance) or to changes in the TMT.Interestingly, little is known about the consequencesof (poor) CHQ performance.

In addition, changing and enduring conditions inthe firm’s external environment are associated withpressure for and resistance to change at the CHQ.Several external factors are associated with strategicchange at the CHQ, including the situation in finan-cial markets and macroeconomic conditions. Forexample, Durmusoglu et al. (2008, p. 387) study aconglomerate that changed its strategy from growthvia mergers and acquisitions (M&A) to organicgrowth through new product development. They findthat this ‘change in the parent company’s strategy’was driven by a change in the financial markets andin analysts’ expectations. Relatedly, institutionalchange can foster a rethinking of the CHQ’s value-adding role (e.g. Hungenberg 1993).

Outcomes

A few studies empirically investigate the outcomesof strategic changes at the CHQ. Durmusoglu et al.(2008) study whether a change in the product-innovation strategy at the CHQ resonates in the sameway among different operating units. They find dif-ferences in how the operating units ‘reshape theirstructure and resource allocation, changing variousdimensions of their innovation strategy while alsofitting the competitive structure in their individual,non-high-tech, traditional manufacturing industriesas they respond to the corporate mandate’ and that‘[. . .] even with the immense power corporatehas [. . .], some still dance to their own tune’

1We thank an anonymous reviewer for drawing our attentionto the implicit assumptions of this assertion.


361

S. Kunisch et al.

(Durmusoglu et al. 2008, p. 387). This study there-fore serves as an example of the intermediate out-comes at the BU level.

With respect to performance outcomes, scholarsgenerally assume that changes at the CHQ are ameans to (re-)establish fit. The underlying argumentrelies on contingency logic, and its premise thatinternal and external fit lead to superior performance(Donaldson 1987, 2001). For example, Campbellet al. (1995a) postulate that a fit between the CHQ’sparenting style and the firm’s business portfolio cancreate value, whereas a lack of fit can destroy value.However, empirical evidence from large-scalesamples on the performance implications of strategicchanges at the CHQ is lacking.

Discussion

Collectively, the extant studies make important con-tributions to the CHQ and strategic-change litera-tures. Specifically, two insights appear to be key.First, while the majority of studies on corporate-levelstrategic change focus on changes in the businessportfolio as one aspect of corporate strategy, theresearch reviewed here highlights strategic change atthe CHQ unit as an important dimension ofcorporate-level strategic change. This research sug-gests that firms rarely implement fundamentalchanges at the CHQ level. Second, corporate-levelactors play a crucial role. In fact, if strategic changesoccur at the CHQ, they are usually driven by theseactors.

Despite these contributions, research in the strat-egy domain has certain limitations. While manyinsights are based on illustrative case studies,large-scale, quantitative research is relatively scarce.Specifically, empirical tests of the performanceimplications of strategic change at the CHQ remainvery limited. Perhaps as a consequence, we have onlyinconclusive findings on the benefits and costs ofstrategic changes at the CHQ. In addition, with theexception of a few studies (e.g. Goold 1994), weknow little about the processes associated with suchchanges.

Research in the organizational-design domain

Changes at the CHQ can also be conceptualized aschanges in organizational design. Organization theo-rists typically distinguish between the unit and

organizational-design levels, and among variouscomponents of design (e.g. Nadler et al. 1992).Although the two design levels are interrelated,‘effective design at the unit level of the organizationis crucial to success’ (Nadler et al. 1992, p. 35). Thisis especially true for the CHQ units of large firms(Campbell et al. 1995b; Porter 1987). Studies in thisarea investigate changes in several organizational-design components, such as the work, the people, andthe formal and informal organizational designs at theCHQ. Such changes in the formal and informalorganizational designs include changes in the levelsof formalization and centralization, as well aschanges in the relationship between the CHQ and itssubsidiaries. Table 3 provides a summary of thestudies in the organizational-design domain.

Characteristics

A common theme in this domain is the pendulumbetween decentralization and centralization. Basedon these two extremes of organizational change,Ferlie and Pettigrew (1996) identify several generictrends that still appear to be prevalent. The first trendis downsizing (Ferlie and Pettigrew 1996, p. 497).For example, in the 1980s, volatility in productmarkets and the search for new competitive advan-tages led to reorganizations in many large firms(Aksoy and Marshall 1992). The restructuring ofmany of these firms, such as BP, Unilever, ICI andNatWest, often included significant staff reductions(Young 1993). A second trend is decentralizing whileretaining core central control (Ferlie and Pettigrew1996, p. 498), which refers to the allocation ofgreater responsibility and authority to BUs, while thecore coordination tasks remain centralized at theCHQ. Proponents of centralization usually makevalue-adding and synergy arguments in favour of thistrend, and support for this trend can be found instudies on specific CHQ functions, such as humanresources (e.g. Hendry 1990), strategic planning (e.g.Grant 2003), information technology (e.g. Donovan1988), and research and development (e.g. Park andGil 2006; Reger 2004).

These general trends are reflected in variouschanges in the formal design of the CHQ, such aschanges in the number of staff or the number ofcorporate functions. A few surveys provide trenddata on changes in formal CHQ designs. Forexample, Collis et al. (2007) report on internationaltrends in formal CHQ organizational designs, such aschanges in the number of CHQ staff and corporate


362


Tabl

e3.

Pre

viou

sst

udie

sin

the

orga

niza

tion

al-d

esig

ndo

mai

n

Aut

hor(

s)(y

ear)

aR

esea

rch

focu

sbT

heor

yM

etho

dK

eyfi

ndin

gsre

late

dto

chan

ges

atth

eC

HQ

c

Pett

igre

w(1

985,

1987

)C

entr

aliz

atio

n,bu

reau

crac

yan

dco

ntro

l(I

I)P

roce

ssth

eory

Em

piri

cal

stud

y:lo

ngit

udin

alca

sest

udy

ofon

efi

rm(I

CI)

Env

iron

men

tal

chan

gean

dpr

essu

rear

ene

eded

for

inte

rnal

stra

tegi

cch

ange

.S

ubst

anti

alch

ange

sse

emto

only

occu

rw

hen

firm

sar

ein

seve

reec

onom

icdi

fficu

ltie

s.To

mas

ko(1

987)

CH

Qst

aff

and

CH

Qfu

ncti

ons

(II;

II–I

II)

No

expl

icit

theo

ry:

man

ager

ial

Ane

cdot

al;

case

exam

ples

The

dece

ntra

liza

tion

ofC

HQ

func

tion

sha

sse

vera

lob

ject

ives

.The

HR

func

tion

isim

port

ant

insu

stai

ning

ale

anC

HQ

,w

hich

can

bem

uch

hard

erth

anac

hiev

ing

ale

anC

HQ

.D

onov

an(1

988)

Cen

tral

izat

ion

ofC

HQ

reso

urce

san

dco

ntro

l(I

)n/

a:de

scri

ptiv

en/

a:de

scri

ptiv

eTe

chno

logi

cal

chan

ge,

and

stra

tegi

can

dor

gani

zati

onal

fact

ors

are

driv

ing

the

dece

ntra

liza

tion

ofco

mpu

ting

pow

erfr

omth

eC

HQ

tode

cent

rali

zed

unit

s.O

hmae

(198

9)C

HQ

task

san

dce

ntra

liza

tion

ofde

cisi

on-m

akin

g(I

I;II

–III

)

No

expl

icit

theo

ry:

cont

inge

ncy

theo

ry,

man

ager

ial

Not

expl

icit

lysp

ecifi

ed;

case

stud

ies

The

rest

ruct

urin

gof

the

CH

Qin

tose

vera

lre

gion

alH

Qis

impo

rtan

tfo

ra

com

pany

’ssu

cces

sful

tran

siti

onin

toa

glob

alpl

ayer

.

Hen

dry

(199

0)C

HQ

func

tion

/pr

oces

ses

(HR

);de

cent

rali

zati

on(I

–II;

II)

No

expl

icit

theo

ry:

inte

rnal

labo

urm

arke

tE

mpi

rica

lst

udy

(qua

lita

tive)

:10

larg

eor

gani

zati

ons

Dec

entr

aliz

atio

nin

the

1980

spr

ompt

edre

thin

king

ofth

ero

le,

stat

usan

dac

tivit

ies

ofth

eH

Rfu

ncti

on.

Ow

ing

tode

cent

rali

zati

on,

ther

eis

asi

gnifi

cant

shif

tin

the

corp

orat

eH

Rro

le.

Ste

war

tII

I(1

990)

Dec

entr

aliz

atio

nof

auth

orit

yan

dow

ners

hip

(II–

III)

n/a:

desc

ript

ive

n/a:

illu

stra

tive

case

sT

heC

HQ

can

add

valu

eth

roug

h:en

trep

rene

uria

lm

otiv

atio

nof

BU

man

ager

s;ba

lanc

e-sh

eet

rest

ruct

urin

gan

dst

rict

fina

ncia

lco

ntro

l;an

dde

cent

rali

zing

auth

orit

yan

dow

ners

hip.

Use

eman

dG

ottl

ieb

(199

0)D

ecis

ion-

mak

ing

auth

orit

y;C

HQ

staf

f(I

–II;

II)

Age

ncy

theo

ry:

owne

rshi

p-di

scip

line

dal

ignm

ent

Qua

lita

tive

(int

ervi

ews

and

docu

men

ts):

12co

mpa

nies

Focu

son

shar

ehol

der

valu

e,am

ong

othe

rs,

fost

ered

dece

ntra

lizi

ngof

deci

sion

-mak

ing

auth

orit

y;co

ntra

cted

CH

Qm

anag

ers

and

staf

ffu

ncti

ons,

and

crea

ted

mec

hani

sms

for

inte

rnal

owne

rshi

p.A

lexa

nder

(199

1)C

HQ

cont

rol;

cent

rali

zati

onof

deci

sion

-mak

ing

(I–I

I)C

onti

ngen

cyth

eory

;tr

ansa

ctio

n-co

stth

eory

;bo

unde

dra

tion

alit

y

Em

piri

cal

stud

y:pa

nel

data

from

97m

ulti

-hos

pita

lsy

stem

s

Org

aniz

atio

nsse

lect

ivel

yde

cent

rali

zeun

der

cond

itio

nsof

incr

easi

ngun

cert

aint

y,bu

tor

gani

zati

onal

age,

disp

ersi

onan

din

itia

lco

ntro

lar

rang

emen

tsm

oder

ate

the

dire

ctio

nan

dm

agni

tude

ofsu

chch

ange

s.A

ksoy

and

Mar

shal

l(1

992)

CH

Qst

aff

and

func

tion

s(I

–II)

Eco

nom

ics

Em

piri

cal

stud

y:su

rvey

ofC

HQ

sof

20la

rge

firm

sin

the

UK

The

num

ber

ofC

HQ

staf

fin

larg

efi

rms

has

decl

ined

subs

tant

ially

owin

gto

corp

orat

ere

stru

ctur

ing.

Inad

diti

on,

CH

Qfu

ncti

ons

have

been

dele

gate

dto

oper

atin

gun

its

orou

tsou

rced

.M

alje

rs(1

992)

Cor

pora

tecu

ltur

e;de

cent

rali

zati

on(I

–II;

II)

n/a:

desc

ript

ive

n/a:

illu

stra

tive

case

(Uni

leve

r)M

&A

incr

ease

sne

edfo

rcu

ltur

alch

ange

tobu

ild

aco

mm

onco

rpor

ate

cult

ure

toav

oid

the

dang

erof

beco

min

gto

ode

cent

rali

zed.

Tom

asko

(199

2)C

orpo

rate

rest

ruct

urin

g;C

HQ

staf

f(I

I)N

oex

plic

itth

eory

:m

anag

eria

lA

necd

otal

;su

ppor

ted

wit

hex

ampl

esIm

prov

emen

tsin

the

basi

cm

anag

emen

tpr

oces

ses

are

ases

sent

ial

asch

ange

sin

the

orga

niza

tion

alst

ruct

ure.


363

S. Kunisch et al.

Am

burg

eyan

dD

acin

(199

4)D

ecen

tral

izat

ion

(I–I

I;II

–III

)C

onti

ngen

cyth

eory

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piri

cal

stud

y(q

uant

itat

ive)

:26

2la

rge

firm

s;ob

serv

edov

er28

year

s

Whi

leth

ere

isa

reci

proc

alre

lati

onsh

ipbe

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rate

gyan

dst

ruct

ure,

ther

eis

ahi

erar

chic

alre

lati

onsh

ipbe

twee

nth

emin

term

sof

the

mag

nitu

dean

dti

min

gof

chan

ge.

Agh

ion

and

Tir

ole

(199

5)C

HQ

cont

rol

(I–I

I)C

ontr

olth

eory

The

ory

buil

ding

;fo

rmal

mod

elli

ngG

row

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dot

her

fact

ors

lead

toco

rpor

ate

rest

ruct

urin

gan

da

refo

cusi

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core

com

pete

nces

,w

hich

may

lead

firm

sto

crea

tepr

ofit

cent

res,

and

toab

ando

nth

eU

-for

min

favo

urof

the

M-f

orm

.C

ibin

and

Gra

nt(1

996)

Dec

entr

aliz

atio

n,co

ntro

l,cu

ltur

e(I

–II;

II)

Org

aniz

atio

nal

chan

geE

mpi

rica

lst

udy:

in-d

epth

case

stud

ies

ofei

ght

larg

eoi

lco

mpa

nies

Cor

pora

tere

stru

ctur

ing

invo

lves

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ansi

tion

from

one

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-str

uctu

reco

nfigu

rati

on(t

head

min

istr

ativ

e-pl

anni

ngm

odel

)to

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her

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(the

mar

ket-

resp

onsi

vene

ssm

odel

).Y

oung

(199

8)C

HQ

size

(num

ber

ofC

HQ

staf

f)(I

–II;

II)

Pare

ntin

gth

eory

;co

ntin

genc

yth

eory

Con

cept

ual

stud

yA

sth

eC

HQ

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bedi

fficu

ltto

chan

ge–

chan

geis

view

edas

ath

reat

toes

tabl

ishe

dem

pire

s–

benc

hmar

ksca

npr

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iona

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oold

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002)

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ntin

genc

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Not

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icit

lysp

ecifi

ed;

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stud

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Com

pani

essh

ould

adop

ta

prac

tica

lap

proa

chto

orga

niza

tion

alre

desi

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dtr

ym

inor

desi

gnch

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sbe

fore

mak

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sign

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Kon

tes

(200

4)C

HQ

activ

itie

s,or

gani

zati

onal

stru

ctur

e,m

odel

(I–-

II;

II)

n/a:

desc

ript

ive

n/a:

desc

ript

ive

The

reis

ane

edfo

rC

HQ

rede

sign

s,as

firm

sch

ange

sign

ifica

ntly

over

tim

e.T

here

are

two

mai

nta

sks:

crea

ting

ane

wC

HQ

mod

elan

dre

plac

ing

the

old

CH

Qm

odel

.R

eger

(200

4)D

ecen

tral

izat

ion;

corp

orat

eR

&D

func

tion

(I–I

I;II

;II

–III

)

No

expl

icit

theo

ryC

once

ptua

lst

udy

wit

han

illu

stra

tive

case

(Phi

lips

Ele

ctro

nics

)

Sin

ceth

eea

rly

1980

s,gl

obal

R&

Dun

its

inM

NC

sha

vebe

enre

orga

nize

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war

dsco

rpor

ate-

wid

ece

ntre

sof

exce

llen

ce,

whi

chin

crea

ses

the

need

for

vari

ous

coor

dina

tion

mec

hani

sms.

Coo

ke(2

006)

Cor

pora

teH

Rfu

ncti

on(I

I;II

–III

)N

oex

plic

itth

eory

Qua

lita

tive:

sing

leca

sest

udy

ofan

MN

CW

hen

sepa

rati

ngth

eH

Rfu

ncti

onin

tost

rate

gic,

oper

atio

nal

and

adm

inis

trat

ive

part

s,th

efi

nanc

ial

and

emot

iona

lco

stof

mov

ing

toa

shar

ed-s

ervi

ces

mod

elca

nou

twei

ghth

eta

ngib

leco

stsa

ving

s.M

orga

nan

dK

rist

ense

n(2

006)

CH

Q–s

ubsi

diar

yre

lati

onsh

ips

(II–

III)

Inst

itut

iona

lth

eory

:in

stit

utio

nal

dual

ity

Con

cept

ual;

theo

rybu

ildi

ngD

ueto

mic

ropo

liti

csbe

twee

nth

eC

HQ

and

MN

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bsid

iari

es,

the

inst

itut

iona

lco

ntex

tspr

oduc

etw

oty

pes

ofsu

bsid

iari

es:

‘boy

scou

t’an

d‘s

ubve

rsiv

est

rate

gy’

subs

idia

ries

.Pa

rkan

dG

il(2

006)

R&

Dfu

ncti

on;

stru

ctur

ean

dpr

oces

ses

(I–I

I;II

)n/

a:de

scri

ptiv

en/

a:il

lust

rativ

eca

se(S

amsu

ng)

Key

driv

ers

ofch

ange

wer

eco

nsen

sus

onth

ene

edfo

rch

ange

,st

rong

top-

man

agem

ent

lead

ersh

ip,

clos

eal

ignm

ent

betw

een

R&

Dan

dth

eB

Us,

acti

onab

lepl

anni

ng,

and

perf

orm

ance

man

agem

ent.

Col

lis

etal

.(2

007)

CH

Qsi

ze,

stru

ctur

ean

dpe

rfor

man

ce(I

I)In

form

atio

npr

oces

sing

;ag

ency

,tr

ansa

ctio

nco

st,

cont

inge

ncy

theo

ries

;re

sour

ce-b

ased

view

Em

piri

cal

stud

y:su

rvey

of60

0co

rpor

atio

nsin

seve

nco

untr

ies

The

stud

yre

port

son

inte

rnat

iona

ltr

ends

inch

ange

sat

the

CH

Q.

Cou

ntry

tren

dsw

ere

sim

ilar

toth

ose

evid

ent

inth

eov

eral

lsa

mpl

e,w

ith

the

exce

ptio

nof

the

US

and

Chi

le.


364


Tabl

e3.

Con

tinu

ed

Aut

hor(

s)(y

ear)

aR

esea

rch

focu

sbT

heor

yM

etho

dK

eyfi

ndin

gsre

late

dto

chan

ges

atth

eC

HQ

c

Har

reld

etal

.(2

007)

CH

Qst

rate

gyde

part

men

t;C

HQ

staf

f(I

I–II

I)D

ynam

icca

pabi

liti

esn/

a:de

scri

ptiv

e(c

ase

desc

ript

ion)

The

intr

oduc

tion

ofB

Uex

peri

ence

dm

anag

ers

tran

sfor

med

the

plan

ning

cult

ure

ofth

eC

HQ

’sst

rate

gyde

part

men

tfr

omac

adem

icto

acti

onor

ient

ed.

Luo

(200

7)C

HQ

–sub

sidi

ary

rela

tion

ship

s(I

–II)

No

expl

icit

theo

ry:

theo

ryof

inte

rnat

iona

lbu

sine

ssC

once

ptua

l;th

eory

buil

ding

Alo

ngw

ith

the

com

peti

tive

and

regu

lato

ryen

viro

nmen

tch

ange

s,m

any

MN

Cs

have

shif

ted

thei

rdo

min

ant

stra

tegi

esfr

om‘f

orei

gnin

vest

ors’

only

to‘s

trat

egic

insi

ders

’.B

orin

iet

al.

(200

9)C

HQ

–sub

sidi

ary

rela

tion

ship

s(I

–II)

The

ory

ofin

tern

atio

nal

busi

ness

Em

piri

cal

stud

y:30

Bra

zili

anM

NE

san

d66

subs

idia

ries

,su

rvey

The

subs

idia

ry’s

com

peti

tive

cont

ext

and

exte

rnal

netw

ork

are

the

mos

tim

port

ant

elem

ents

for

com

pete

nce

deve

lopm

ent,

and

for

tran

sfer

toan

dre

cogn

itio

nby

the

CH

Q.

Am

bos

etal

.(2

010)

CH

Q–s

ubsi

diar

yre

lati

onsh

ips

(I–I

I)R

esou

rce-

depe

nden

ceth

eory

;se

lf-

dete

rmin

atio

nth

eory

Em

piri

cal

stud

y:25

7su

bsid

iari

esin

thre

eco

untr

ies,

surv

ey

Sub

sidi

arie

sin

flue

nce

thro

ugh

init

iativ

eson

lyin

crea

ses

ifth

eC

HQ

isin

tere

sted

.Whi

lesu

bsid

iary

init

iativ

esha

vea

dire

ctef

fect

onsu

bsid

iary

auto

nom

y,th

eyal

soin

duce

CH

Qco

ntro

l,w

hich

decr

ease

ssu

bsid

iary

auto

nom

y.C

olli

ngs

etal

.(2

010)

CH

Qst

aff

(sta

ffing

flow

s/po

lici

es)

(I–I

I)R

esou

rce-

base

dvi

ew;

neo-

inst

itut

iona

lth

eory

Em

piri

cal

stud

y:21

3M

NE

sin

Irel

and,

surv

eyFi

rms

are

like

lyto

expl

oit

the

reso

urce

sof

subs

idia

rym

anag

ers

thro

ugh

‘inp

atri

ate

assi

gnm

ents

’at

the

CH

Qan

dat

othe

rsu

bsid

iari

esif

the

subs

idia

ryis

larg

ean

dw

ell

inte

grat

edw

ith

othe

rs.

Gos

pel

and

Sak

o(2

010)

CH

Qac

tivit

ies;

HR

func

tion

(I–I

I)C

onti

ngen

cyth

eory

,tr

ansa

ctio

n-co

stth

eory

,re

sour

ce-b

ased

view

Em

piri

cal

stud

y:P

roct

er&

Gam

ble

and

Uni

leve

rA

high

degr

eeof

cent

rali

zati

onfo

ster

san

inte

rnal

shar

ed-s

ervi

ces

cent

rera

ther

than

outs

ourc

ing.

Ade

cent

rali

zed

envi

ronm

ent

favo

urs

outs

ourc

ing

rath

erth

angl

obal

lyst

anda

rdiz

esy

stem

san

dpr

oces

ses.

Jose

phan

dO

casi

o(2

012)

CH

Q–B

Ure

lati

onsh

ips;

CH

Qat

tent

ion

(II;

II–I

II)

M-f

orm

Indu

ctiv

eca

sest

udy

ofG

E’s

gove

rnan

cesy

stem

,19

51–2

001

The

rear

eth

ree

type

sof

coll

ectiv

eve

rtic

alin

tera

ctio

nsbe

twee

nth

eC

HQ

and

Bus

thro

ugh

chan

nel

inte

grat

ion,

whi

chhe

lpex

plai

nst

rate

gic

adap

tive

chan

geat

the

BU

leve

l.K

lein

baum

and

Stu

art

(201

4)C

omm

unic

atio

nne

twor

ksof

CH

Qst

aff

(II)

Net

wor

kth

eory

Em

piri

cal

stud

y:3.

3m

illi

one-

mai

ldy

ads

amon

g24

,090

empl

oyee

sin

one

com

pany

A‘c

orpo

rate

impr

imat

ur’

exis

tson

the

CH

Qst

aff’

sne

twor

kst

ruct

ures

(rel

ativ

eto

BU

s,C

HQ

staf

fha

vem

ore

cent

rali

zed

and

broa

der

netw

orks

)th

atre

mai

nsev

enw

hen

the

peop

lem

ove

back

toth

eB

U.

a Inch

rono

logi

cal

orde

r.b T

hech

arac

ters

inpa

rent

hese

sin

the

seco

ndco

lum

nre

fer

toFi

gure

1.c In

clud

esdi

rect

and

indi

rect

quot

es.


365

S. Kunisch et al.

functions, and changes in CHQ costs (see also Younget al. 2000). They find that, relative to five yearsbefore the study, 42% of the CHQ had fewer staff,32% had the same number of staff, and 26% hadmore staff. Trends in the individual countries weresimilar to those evident in the overall sample, withthe exception of the US and Chile, where approxi-mately 50% of firms reported increases in thenumber of CHQ staff.

Antecedents

Several internal factors can be associated withorganizational design changes at the CHQ level. First,a few studies explore the role of corporate-levelfactors, including corporate strategy and corporaterestructuring. For example, Aksoy and Marshall(1992) suggest that corporate restructuring, thedelegation of tasks to operating companies and out-sourcing have led to a substantial decrease in thenumber of CHQ staff in large firms. Cibin and Grant(1996) study corporate restructuring in eight interna-tional oil majors from 1980 to 1992. They linkchanges in corporate strategy – especially a narrowingof the firm’s scope – to various changes at the CHQ,including decentralization, a lower level of formality,a lower level of specialization, the introduction ofnon-hierarchical systems of coordination and control,and a redefinition of the roles of the TMT and CHQstaff. In addition, they link changes in business-levelstrategies to strategic change at the CHQ.

Second, several firm characteristics are alsoimportant, especially firm growth and prior firm per-formance (e.g. Aghion and Tirole 1995; Maljers1992; Young and Goold 1993). For example, growthderived through M&A activities increases the needfor cultural change in order to build a common cor-porate culture and avoid the danger of becomingoverly decentralized (Maljers 1992). In addition,prior performance affects changes in the organi-zational design of the CHQ. Substantial changesseem to only occur when firms face severe economicdifficulties (Pettigrew 1985, 1987). Along the samelines, Young and Goold (1993) argue that the drivingforces of CHQ downsizing stem not only fromcorporate styles, but also from cost and efficiencypressures.

Third, several studies consider the operating units’characteristics, such as subsidiary size, CHQ–subsidiary relationships and relationships with othersubsidiaries. For example, firms are likely to exploitthe resources of a subsidiary manager through

assignments to the CHQ or other subsidiaries if thesubsidiary is large and well integrated with othersubsidiaries (Collings et al. 2010). Interestingly,Kleinbaum and Stuart (2014) uncover a ‘corporateimprimatur’ in the CHQ staff’s network structuresthat remains even when the focal employees moveback to their original operating units. Based on anetwork analysis of 3.3 million email interactionsamong 24,090 employees in a single firm, the authorsfind clear differences in the network structure of BUstaff and CHQ staff: CHQ staff members have morecentralized and broader networks.

Finally, as in the strategy domain, a few studiespoint to the crucial role of strategic leadership. Morespecifically, in a comprehensive single case study onthe role of leadership in change processes, Pettigrew(1985, 1987) finds that revolutionary periods ofchange are associated with changes in leadership andpower in the firm. Relatedly, Young (1998) arguesthat changes at the CHQ are viewed as a threat to theestablished empires of those who are running thefirm. The author thus suggests that firms should useexternal benchmarks as a less emotional way ofchallenging the status quo at their CHQs. In a similarvein, Goold and Campbell (2002) propose that com-panies should take several rational steps when engag-ing in organizational redesign and try minor designchanges before making major changes in order toavoid disruptions.

In addition, several external factors are associatedwith organizational-design changes at the CHQ. Inthe 1980s and 1990s, for example, an increased focuson shareholder value triggered a review of CHQactivities (e.g. Useem and Gottlieb 1990). Notably,an increasing degree of internationalization fostereddecentralization in formerly centralized functionssuch as R&D (e.g. Park and Gil 2006; Reger 2004).Similarly, technological changes and the develop-ment of new information technologies are associatedwith decentralization in functional activities (e.g.Donovan 1988; Rajan and Wulf 2006). Anotherimportant factor is the market environment (e.g.Cibin and Grant 1996; Luo 2007; Pettigrew 1985,1987). For example, Pettigrew (1985, 1987) findsthat periods of high-level change activity are associ-ated with economic recessions that affect industries,markets and prices, and thus firms’ relative perfor-mance. Similarly, Cibin and Grant (1996) reveal thatincreased competition and instability are linked tochanges at the CHQ. Alexander (1991) analysespanel data from 97 multihospital systems in a studyof adaptive change in control practices between the


366


CHQ and operating divisions. He finds that ‘organi-zations generally practice selective decentralizationunder conditions of increasing uncertainty butorganizational age, dispersion, and initial controlarrangements significantly moderate the directionand magnitude of such changes’ (Alexander 1991,p. 162).

Outcomes

Some studies explore the consequences of changesin the CHQ’s organizational design. In particular,several intermediate outcomes at the CHQ and BUlevels have been revealed. For example, Harreldet al. (2007, p. 34) find that appointing managerswith business-level experience can transform theculture in the corporate strategy department. Theyobserve that the ‘presence [of such managers] hastransformed the department’s formerly academicplanning culture to one that is much more action-oriented’. Joseph and Ocasio (2012) describe threetypes of interactions between the CHQ and theBUs, and suggest that these types of interactionvary in terms of their effectiveness for the adaptionof strategic change at the BU level. Amburgey andDacin (1994) study intermediate outcomes atthe firm level, and find a reciprocal relationshipbetween strategy and administrative structure.However, in terms of the magnitude and timing ofchanges in strategy and structure, they find a hier-archical relationship, with strategy being a moreimportant determinant of structure than structure isof strategy.

Unfortunately, we could not identify any studies ofthe performance outcomes of changes in the CHQ’sorganizational design. However, one study does pos-tulate a range of objectives for changes at the CHQthat reflect potential intermediate and performanceconsequences. In this study, Tomasko (1987, p. 36)identifies a range of objectives for firms attemptingto turn CHQ functions into ‘businesses’ that providetheir services not only internally, but also to custom-ers outside the firm. These objectives includedecreased overhead costs, additional profits, broaderCHQ services than the company could afford if ser-vices were only offered internally, higher customerorientation among CHQ staff and higher retention ofhigh-quality staff. In a similar vein, Stewart III(1990) argues that the CHQ can increase shareholdervalue by motivating BU managers, restructuring thebalance sheet and engaging in strict financial control,and decentralizing authority and ownership. Future

studies might consider these objectives as potentialoutcomes of changes at the CHQ.

Discussion

Collectively, these studies develop vital insights withrespect to the CHQ and organizational-change litera-tures. First, a number of corporate-level factorsincrease the need for changes at the CHQ, includingchanges in corporate strategy, corporate restructur-ing and growth. Relatedly, CHQ–subsidiary relation-ships are important. Second, a common themecentres on the interrelationships among changes invarious aspects of the CHQ unit’s formal and infor-mal designs, the culture and the people.

However, research in this domain has some short-comings. First, as with research in the strategydomain, research on the effects of changes in theorganizational design of the CHQ is relatively scarce.For example, some scholars argue that, if companiesgreatly reduce the size of their CHQs, they mightlose important corporate capabilities (e.g. Colliset al. 2007; Raynor and Bower 2001). Yet, thereis a lack of empirical evidence on the inter-mediate and performance consequences of suchchanges. Second, with the exception of a few studies,little is known about the change agents. We thus lackspecific knowledge of which actors (i.e. externalconsultants) trigger and implement changes in theorganizational design of the CHQ.

Research in the physical domain

Finally, changes at the CHQ can be conceptualized asphysical changes, which include changes in geo-graphical location of the CHQ and changes in otherphysical artefacts, such as CHQ buildings. Moststudies in this domain have explored the effect ofCHQ relocation. Table 4 summarizes the relevantstudies in the physical domain.

Characteristics

Research on changes in the location of the CHQeither within one country (e.g. Davis and Henderson2008; Feldman and Bolino 1998; Holloway andWheeler 1991; Klier and Testa 2002; Voget 2011) oracross national borders (e.g. Baaij et al. 2004,2012a,b; Birkinshaw et al. 2006; Laamanenet al. 2012; Voget 2011) has increased in recentyears. Indeed, the phenomenon of CHQ relocation is


367

S. Kunisch et al.

Tabl

e4.

Pre

viou

sre

sear

chin

the

phys

ical

dom

ain

Aut

hor(

s)(y

ear)

aR

esea

rch

focu

sbT

heor

yM

etho

dK

eyfi

ndin

gsre

late

dto

chan

ges

atth

eC

HQ

c

Hol

low

ayan

dW

heel

er(1

991)

CH

Qre

loca

tion

s(I

–II)

Dis

pers

ion

theo

ryE

mpi

rica

lst

udy:

300

larg

efi

rms

from

1980

to19

87C

hang

esin

met

ropo

lita

nco

rpor

ate

dom

inan

cear

ecl

osel

yre

late

dto

spat

ial

shif

tsin

the

CH

Q’s

loca

tion

.G

hosh

etal

.(1

995)

CH

Qre

loca

tion

s(I

I–II

I)N

oex

plic

itth

eory

:fi

nanc

eE

mpi

rica

lst

udy:

even

tst

udy;

160

CH

Qre

loca

tion

sbe

twee

n19

66an

d19

92

The

stoc

k-m

arke

tre

acti

ons

toC

HQ

relo

cati

ons

are:

(1)

posi

tive

whe

nde

cisi

ons

are

attr

ibut

edto

cost

savi

ngs

and

(2)

nega

tive

whe

nde

cisi

ons

are

prom

pted

bym

anag

eria

lse

lf-i

nter

est.

Feld

man

and

Bol

ino

(199

8)E

mpl

oyee

mob

ilit

ydu

ring

relo

cati

ons

(III

)

No

expl

icit

theo

ryE

mpi

rica

lst

udy:

surv

eyof

380

empl

oyee

sof

ago

vern

men

tde

fenc

eag

ency

Em

ploy

eew

illi

ngne

ssto

mov

edu

ring

relo

cati

ons

isde

term

ined

byth

eir

(1)

atta

chm

ents

toth

epr

esen

tco

mm

unit

y,(2

)at

tach

men

tsto

the

curr

ent

orga

niza

tion

and

(3)

opti

ons

onth

ejo

bm

arke

t.

Shi

lton

and

Sta

nley

(199

9)C

HQ

loca

tion

deci

sion

s(I

–II;

II–I

II)

Clu

ster

theo

ry(c

ompe

titiv

esy

nerg

ies)

Em

piri

cal

stud

y:6,

525

CH

Qs

in19

96,

1,45

5C

HQ

ssu

rviv

edsi

nce

1986

Firm

ssp

atia

llycl

uste

rfo

rco

mpe

titiv

ead

vant

age

(Por

ter

1998

).C

ount

ies

wit

hC

HQ

sof

dive

rse

firm

ste

ndto

host

vari

ous

CH

Qs,

and

coun

ties

wit

hC

HQ

insp

ecifi

cin

dust

ries

attr

act

firm

sin

thos

ein

dust

ries

.G

arna

ut(2

002)

CH

Qre

loca

tion

s(I

–II;

II–I

II)

Eco

nom

ics

Naï

veth

eori

zing

(ded

uctiv

eth

eory

buil

ding

)R

egul

atio

ns(t

ore

duce

tran

spor

tan

dte

leco

mm

unic

atio

nsco

sts,

and

toin

crea

seth

eat

trac

tion

sof

peop

lew

ith

exec

utiv

ele

ader

ship

skil

ls)

posi

tivel

yin

flue

nce

CH

Qlo

cati

onde

cisi

ons.

Kli

eran

dTe

sta

(200

2)C

HQ

geog

raph

iclo

cati

ontr

ends

(I–I

I)

n/a:

desc

ript

ive;

com

peti

tive

adva

ntag

eE

mpi

rica

lst

udy:

larg

e,pu

blic

lytr

aded

US

com

pani

es

Tre

nds

for

pref

erre

dC

HQ

loca

tion

san

dth

ede

term

inan

tsof

CH

Qgr

owth

inm

etro

poli

tan

stat

isti

cal

area

s(M

SA

s)ar

e:po

pula

tion

and

chan

ges

inpo

pula

tion

,in

dust

ries

,an

dre

gion

s.B

aaij

etal

.(2

004)

CH

Qre

loca

tion

s(I

–II)

The

ory

onin

tern

atio

nal

busi

ness

(MN

C);

pare

ntin

gth

eory

Con

cept

ual

stud

y(i

nclu

ding

empi

rica

ltr

end

data

)A

conc

eptu

alfr

amew

ork

ofde

term

inan

tsof

CH

Qre

loca

tion

ssu

gges

tsfo

urse

tsof

fact

ors:

(1)

firm

spec

ifics

,(2

)in

dust

rysp

ecifi

cs,

(3)

met

ropo

lita

nsp

ecifi

cs,

and

(4)

nati

onan

dre

gion

spec

ifics

.B

rouw

eret

al.

(200

4)C

HQ

relo

cati

ons

(I–I

I)L

ocat

ion

theo

ries

:ne

ocla

ssic

al,

beha

viou

ral,

inst

itut

iona

l

Em

piri

cal

stud

y:5,

568

firm

s,21

coun

trie

sfr

om19

97to

1999

;su

rvey

Inte

rnal

fact

ors

(cha

nges

inth

ew

orkf

orce

)as

wel

las

exte

rnal

fact

ors

(gro

wth

thro

ugh

M&

A)

infl

uenc

eC

HQ

relo

cati

ons.

Firm

sse

rvin

gla

rger

mar

kets

relo

cate

mor

eof

ten.

Gre

gory

etal

.(2

005)

CH

Qre

loca

tion

s(I

–II)

n/a

Em

piri

cal

stud

y:16

7C

HQ

relo

cati

ons

over

six

year

sT

here

isli

ttle

evid

ence

ofim

prov

edop

erat

ing

perf

orm

ance

afte

rre

loca

tion

,an

dth

edi

stan

cebe

twee

nth

eol

dan

dne

wlo

cati

ons

has

nosi

gnifi

cant

impa

cton

perf

orm

ance

.B

irki

nsha

wet

al.

(200

6)C

HQ

relo

cati

ons

(I–I

I)In

tern

atio

nal

busi

ness

;in

stit

utio

nal;

corp

orat

est

rate

gyan

dgo

vern

ance

Em

piri

cal

stud

y:S

wed

ish

MN

Cs;

35C

HQ

san

d12

5B

UH

Qs;

surv

ey

CH

Qre

loca

tion

sar

ea

resp

onse

toth

epe

rcei

ved

dem

ands

and

oppo

rtun

itie

sof

fere

dby

over

seas

shar

ehol

ders

and

capi

tal

mar

kets

.

Pir

insk

yan

dW

ang

(200

6)C

HQ

geog

raph

icre

loca

tion

s(I

I–II

I)N

oex

plic

itth

eory

;fi

nanc

eE

mpi

rica

lst

udy

(qua

lita

tive)

:11

8fi

rms;

from

1992

to19

97

The

stoc

kre

turn

sof

firm

sw

ith

CH

Qs

inth

esa

me

geog

raph

ical

loca

tion

co-m

ove,

the

co-m

ovem

ent

ofth

est

ocks

ofth

eol

d(n

ew)

loca

tion

decr

ease

s(i

ncre

ases

)w

hen

firm

sre

loca

teth

eir

CH

Qs.

Bar

ner-

Ras

mus

sen

etal

.(2

007)

CH

Qre

loca

tion

s(I

–II;

II)

The

ory

ofin

tern

atio

nal

busi

ness

(MN

C)

Em

piri

cal

stud

y(q

uali

tativ

e):

mul

tipl

eca

sest

udy

ofFi

nnis

hM

NC

s

The

rear

esi

xke

ydr

iver

s(i

nter

nal

and

exte

rnal

),ea

chin

volv

ing

prag

mat

ican

dsy

mbo

lic

dim

ensi

ons

ofC

HQ

relo

cati

ons.

The

rear

ese

vera

lre

loca

tion

type

s,in

clud

ing

dire

ct,

hidd

en,

full

,pa

rtia

lan

dvi

rtua

l.


368


Tabl

e4.

Con

tinu

ed

Aut

hor(

s)(y

ear)

aR

esea

rch

focu

sbT

heor

yM

etho

dK

eyfi

ndin

gsre

late

dto

chan

ges

atth

eC

HQ

c

Cox

and

Sch

ultz

(200

7)S

tock

-mar

ket

effe

cts

ofC

HQ

relo

cati

ons

(II–

III)

No

expl

icit

theo

ry:

mar

ket-

base

dvi

ewE

mpi

rica

lst

udy

(eve

ntst

udy)

:C

HQ

relo

cati

ons

ofU

Sfi

rms

from

1994

to20

05

The

reis

anov

eral

lpo

sitiv

ere

lati

onsh

ipbe

twee

nre

loca

tion

san

dst

ock

retu

rns.

Itis

mos

tpo

sitiv

eif

man

ager

ial

inte

rest

isth

ere

ason

,st

ill

posi

tive

ifco

sts/

cons

olid

atio

nis

the

reas

on,

and

nega

tive

ifsp

ace

isth

ere

ason

.

Dav

isan

dH

ende

rson

(200

8)

Spa

tial

aggl

omer

atio

nof

the

CH

Q(I

I–II

I)E

cono

mic

theo

ries

;ec

onom

icge

ogra

phy

Em

piri

cal

stud

y:U

SC

HQ

loca

tion

sfr

om19

77to

1997

infi

ve-y

ear

inte

rval

s

Ase

para

tion

ofce

ntra

lad

min

istr

atio

nfr

ompr

oduc

tion

can

bene

fit

the

CH

Q:

(1)

the

avai

labi

lity

ofdi

ffer

ent

loca

lse

rvic

e-in

put

supp

lier

san

d(2

)th

esc

ale

ofot

her

CH

Qac

tivit

ies

near

by.

Hen

ders

onan

dO

no(2

008)

CH

Qre

loca

tion

s(I

–II)

Eco

nom

icth

eori

es;

econ

omic

geog

raph

yE

mpi

rica

lst

udy:

488

US

man

ufac

turi

ngfi

rms

betw

een

1992

and

1997

Firm

sco

nsid

erth

ebe

nefi

ts(a

bili

ties

toou

tsou

rce

serv

ice

func

tion

sin

the

area

and

toga

ther

mar

ket

info

rmat

ion)

and

incr

ease

dco

mm

unic

atio

n/co

ordi

nati

onco

sts

ofse

para

ting

thei

rC

HQ

sfr

ompr

oduc

tion

site

s.D

esai

(200

9)C

HQ

relo

cati

ons

(I–I

I;II

)N

oex

plic

itth

eory

:th

eory

ofin

tern

atio

nal

busi

ness

Con

cept

ual;

illu

stra

tive

case

sFi

rms

unbu

ndle

thei

rC

HQ

func

tion

san

dre

allo

cate

them

oppo

rtun

isti

cally

acro

ssna

tion

s.A

firm

’sle

gal

hom

e,it

sfi

nanc

ial

hom

ean

dit

sho

mes

for

man

ager

ial

tale

ntno

long

erne

edto

beco

-loc

ated

.S

trau

ss-K

ahn

and

Viv

es(2

009)

CH

Qre

loca

tion

s(I

–II)

No

expl

icit

theo

ry:

new

econ

omic

geog

raph

ym

odel

Em

piri

cal

stud

y:26

,195

CH

Qin

276

US

area

sin

1996

and

2001

Lar

ger

and

youn

ger

CH

Qs,

larg

eran

dfo

reig

nfi

rms,

and

firm

scr

eate

dth

roug

hM

&A

relo

cate

mor

eof

ten.

Goo

din

fras

truc

ture

and

busi

ness

serv

ices

,lo

wta

xes/

wag

es,

indu

stri

alco

ncen

trat

ion

and

othe

rC

HQ

sat

trac

tC

HQ

.va

nM

arre

wij

k(2

009)

CH

Qbu

ildi

ngan

dde

sign

(art

efac

ts)

(II)

No

expl

icit

theo

ryE

mpi

rica

lst

udy

(qua

lita

tive)

:lo

ngit

udin

alca

sest

udy

The

CH

Qbu

ildi

ngis

aph

ysic

alem

bodi

men

tof

the

firm

’sor

gani

zati

onal

chan

gehi

stor

y.A

firm

’slo

cati

onin

ago

vern

men

tbu

ildi

ng(s

pati

alpo

siti

onin

g)is

are

flec

tion

ofth

epr

ivat

izat

ion

proc

ess.

Vog

et(2

011)

CH

Qcr

oss-

bord

erm

obil

ity

(I–I

I)N

oex

plic

itth

eory

:ec

onom

ics

Em

piri

cal

stud

y:14

0M

NC

s,19

97–2

007

The

addi

tion

alta

xdu

ein

the

hom

eco

untr

yha

sa

posi

tive

effe

cton

CH

Qre

loca

tion

,an

dco

ntro

lled

fore

ign

corp

orat

ion

legi

slat

ion

has

apo

sitiv

eef

fect

onth

enu

mbe

rof

relo

cati

ons.

Baa

ijet

al.

(201

2a)

CH

Qre

loca

tion

s(I

I)N

oex

plic

itth

eory

:ec

onom

ics

Em

piri

cal

stud

y:58

ofth

e10

0-la

rges

tD

utch

MN

Cs

The

inte

rnat

iona

liza

tion

ofm

arke

tsan

din

dust

ries

fost

ers

the

inte

rnat

iona

lre

loca

tion

ofC

HQ

part

s.S

trat

egic

bene

fits

and

cost

sex

ist,

and

ther

ear

eth

ree

opti

ons

for

CH

Qre

loca

tion

s.B

aaij

etal

.(2

012b

)C

HQ

relo

cati

ons

(I–I

I;II

–III

)N

oex

plic

itth

eory

:th

eory

ofin

tern

atio

nal

busi

ness

Em

piri

cal

stud

y(q

uant

itat

ive)

:58

ofth

e10

0-la

rges

tD

utch

MN

Cs

An

incr

ease

inth

efi

rm’s

degr

eeof

inte

rnat

iona

liza

tion

degr

eean

da

decr

ease

inth

epe

rcei

ved

hom

e-co

untr

yat

trac

tiven

ess

driv

eC

HQ

relo

cati

ons.

The

rear

ese

vera

lst

rate

gic

bene

fits

ofov

erse

asre

loca

tion

s.L

aam

anen

etal

.(2

012)

CH

Qre

loca

tion

s(I

–II)

No

expl

icit

theo

ry:

theo

ryof

inte

rnat

iona

lbu

sine

ss

Em

piri

cal

stud

y:52

cros

s-bo

rder

CH

Qre

loca

tion

sin

Eur

ope

from

1996

to20

06

Pus

hfa

ctor

sin

crea

seth

eli

keli

hood

ofC

HQ

relo

cati

on.

Pul

lfa

ctor

sin

crea

seth

eat

trac

tiven

ess

ofce

rtai

nC

HQ

loca

tion

s.C

atal

ysin

gfa

ctor

sin

crea

seth

ete

nden

cyto

relo

cate

.

a Inch

rono

logi

cal

orde

r.b T

hech

arac

ters

inpa

rent

hese

sin

the

seco

ndco

lum

nre

fer

toFi

gure

1.c In

clud

esdi

rect

and

indi

rect

quot

es.


369

S. Kunisch et al.

striking in terms of the occurrence and scale of thechange. With regard to occurrence, some studies findthat between 5% and 6% of CHQs relocate each year(Strauss-Kahn and Vives 2009; Voget 2011).Feldman and Bolino (1998) report that US firmsspend over US$20 billion on corporate relocationsand uproot over 250,000 employees each year.In terms of scale, CHQ relocations are majororganizational events. Card et al. (2010, p. 222) usean example to illustrate the scale of CHQ relocations:‘Boeing was granted 50 million USD (about 100,000USD per job) in tax abatements to relocate its CHQfrom Seattle to Chicago. The move involved around500 top managers but no major production facilities’.

The geographical location of the CHQ matters formany reasons. For example, it affects the firm’scapital structure (Gao et al. 2011), its taxes, itsaccess to information (Lovely et al. 2005) and itsaccess to a wide range of resources, such as humancapital (for a comprehensive review on agglomera-tion research, see McCann and Folta 2008). Onestudy has explored the actual CHQ building as aphysical embodiment of the firm’s organizational-change history (van Marrewijk 2009). The studyfinds that a firm’s proximity to government buildings(spatial positioning) reflects its privatization process.In other words, changes in the corporate architecturemanifest as physical embodiments of organizationalchange at large. Given the importance of CHQ loca-tion changes, management scholars have attemptedto improve our understanding of CHQ mobility. Forexample, Birkinshaw et al. (2006, p. 682) note that‘the phenomenon of HQ relocation is on the rise, andas such it merits careful academic consideration’.

Antecedents

Several factors in the firm’s internal environmentinfluence CHQ relocation. First, managerial interestscan drive CHQ relocation decisions (e.g. Cox andSchultz 2007; Ghosh et al. 1995). Second, ownershipand shareholder characteristics can influence suchdecisions. For example, Birkinshaw et al. (2006,p. 697) find that companies move their CHQ overseasmainly in ‘response to the perceived demands andopportunities offered by overseas shareholders andcapital markets’. This finding ‘underlines the impor-tance of the externally facing role of the [CHQ], asthe interface between the activities of the MNC’sbusiness units and the capital markets’ (Birkinshawet al. 2006, p. 697), and thus serves as a goodexample of how research on changes at the CHQ can

inform our knowledge about the CHQ in general.Third, several firm characteristics are associated withCHQ relocations. For example, larger and youngerCHQs relocate more often, as do CHQs of largerfirms, foreign firms and firms created through M&Aactivity (Strauss-Kahn and Vives 2009). Along theselines, Brouwer et al. (2004) identify two internalfactors – changes in the workforce, and externalgrowth through M&A – that affect CHQ relocations.

In addition, certain conditions in the firm’s exter-nal environment, such as regulations and the capitalmarkets, are associated with CHQ relocations. Withrespect to regulations, conceptual and empiricalstudies suggest that taxes and company laws influ-ence decisions to relocate CHQs (e.g. Baaij et al.2004; Laamanen et al. 2012). For example, Garnaut(2002, p. 447) suggests that ‘reforms to reduce trans-port and telecommunications costs and to increasethe attractions of residence in Australia of peoplewith skills that are important in executive leadershipwould have positive effects’. Another set of factorsrelates to the elements associated with the marketenvironment, including capital markets, market sizeand the extent of internationalization. For example,Brouwer et al. (2004) find that market size is posi-tively related to the frequency of CHQ relocations.Interestingly, in a study of BU HQ and CHQ reloca-tions, Birkinshaw et al. (2006) find that the presenceof international customers and competition affect therelocation of BU HQs, but not of CHQs. Their find-ings highlight the difference between the corporateand the BU levels.

Many studies suggest that a mix of factors in theinternal and external environments may be linked toCHQ relocations. For example, Barner-Rasmussenet al. (2007) identify six key internal and externaldrivers: the control and integration of subsidiaries,the desire to induce HR-related change, the demandsof owners and other stakeholders, a physical pres-ence in a relevant area, the costs and spatial structureof management, and quality-of-life considerations.Each of these drivers has a pragmatic dimension anda symbolic dimension. Laamanen et al. (2012) iden-tify three sets of factors: push factors (high taxes anda high employment rate) increase the likelihood ofCHQ relocations; pull factors (central location andlow taxes) increase the attractiveness of CHQ loca-tions; and catalysing factors (export-oriented firmsand regional HQ) increase the tendency to relocate.Cox and Schultz (2007) distinguish among threemotivations for CHQ relocations and find that stock-holders react positively to relocations motivated by


370


cost/consolidation and managerial interests, butnegatively to those motivated by space considera-tions. Strauss-Kahn and Vives (2009) find that firmsrelocate their CHQs to areas that offer certainbenefits, such as access to good airport facilities, lowtaxes, low wages, high levels of business services,same-industry specialization and the CHQs of indus-try competitors. More generally, Baaij et al. (2004)propose a conceptual framework with four categoriesof determinants of CHQ location decisions. Thesecategories include various factors in the firm’s inter-nal and external environments.

In addition, scholars have recently started to relaxthe assumption of a single CHQ entity and, instead,studied different parts of the CHQ. For example,Desai (2009) argues that firms can have multipleCHQs, which might include a legal home, a financialhome and a home for managerial talent, all of whichcan be relocated independently. Similarly, Baaij et al.(2012b) find that large firms are increasingly movingcore CHQ parts abroad; only the corporate legalentity tends to be kept ‘at home’. Furthermore, theirstudy reveals that different core CHQ parts have dif-ferent drivers of relocation, such as the degree towhich firms are internationalized and the perceivedattractiveness of their home countries.

Outcomes

Several studies explore the intermediate and perfor-mance outcomes of CHQ relocations. First, CHQrelocations affect various intermediate outcomes. Forexample, in their study of the determinants of CHQagglomeration, Davis and Henderson (2008) suggestthat the CHQ benefits from spatial separation fromits production sites in two important ways. First, thebroader range of expert services available for variousneeds improves the CHQ’s productivity. Second, theCHQ benefits from its close proximity to otherCHQs. However, Feldman and Bolino (1998) cautionthat the loss of key employees can become an issue.They find several important factors that affect anemployees’ willingness to move in conjunction witha CHQ’s relocation, including their relationshipswith the present community and the current organi-zation as well as the availability of job alternatives.Baaij et al. (2012a) list various benefits and costsassociated with relocations. In a related study, thesame authors argue that moving core CHQ partsoverseas can be beneficial for firms, because of bettercommunication and knowledge exchange with over-seas stakeholders, access to international resources,

and access to fiscal, legal and regulatory regimes(Baaij et al. 2012b).

Second, scholars relate CHQ relocations to variousperformance outcomes, such as operational perfor-mance (Gregory et al. 2005), tax savings (e.g.Laamanen et al. 2012) and, most frequently, stock-price effects (e.g. Cox and Schultz 2007; Ghosh et al.1995; Pirinsky and Wang 2006). For example,Pirinsky and Wang (2006) find that the stock returnsof firms with CHQs in the same geographical loca-tion co-move, and that the co-movement of the stocksin the old (new) location decreases (increases) whenfirms move their CHQs. Ghosh et al. (1995) catego-rize the motives for CHQ relocations into six groups:cost, agency, business growth, business decline, saleand no reason. They find that shareholder reactionsare positive when CHQ relocations are motivated bycost savings, whereas they are negative when reloca-tions are related to managerial self-interest. In asimilar study, Cox and Schultz (2007) find an overallpositive relationship between CHQ relocations andstock prices. More specifically, they find that share-holder reactions are most positive when relocationsare the result of managerial interest. The reactionsare also positive when cost/consolidation is thereason for the move and, to some extent, even whenno reason is given. However, the reaction is negativewhen space is the reason.

Discussion

Collectively, research in the physical domain contri-butes to knowledge of firm-level decisions. Mostimportantly, these studies improve scholarly under-standing of the contemporary phenomenon ofCHQ relocations, which seems on the rise. As CHQrelocations can have significant symbolic andorganizational implications, they merit careful schol-arly investigation (Birkinshaw et al. 2006). More spe-cifically, we are already aware that specific aspects ofthe firm and its location determine CHQ relocations.In general, these factors can increase the attractive-ness of a geographic location (country or region), andthus either decrease the likelihood of a CHQ reloca-tion or attract new CHQs. Thanks to the availability ofsecondary data, studies in this domain provide empiri-cal evidence on the performance consequences ofspecific aspects of CHQ change. Overall, there issome evidence that CHQ relocations have a positiveeffect on firm performance (e.g. stock-market reac-tions), although such reactions seem to depend on therationale behind the relocation decision.


371

S. Kunisch et al.

Despite these valuable insights, future researchneeds to address three shortcomings. First, with theexception of a few studies (e.g. Baaij et al. 2012b;Desai 2009), extant research on CHQ relocations haslargely focused on the CHQ as a whole and has reliedon data on legal domiciles. Recently, however, somecompanies have reported that they have dual or evenmultiple CHQs. For example, in describing how aDutch company moved its global CEO and parts ofits CHQ to China, Birkinshaw (2010) points to thetrend of ‘second homes’ and dispersed CHQs. Somecompanies claim that they do not have a traditionalCHQ; instead they have opted for a virtual CHQ andthe rotation of TMT meetings around major sites(e.g. Baaij et al. 2012a; Birkinshaw et al. 2006).Baaij et al. (2012a) suggest the relocation of a TMTmember’s office, extensive reliance on travel andcommunication, and adopting second homes as alter-natives to full relocation. As there is little knowledgeof such practices, this area offers great potential forfuture empirical work. Second, as many studies focuson the short-term consequences at the firm level, wehave few insights into the intermediate or long-termeffects of CHQ relocations. It seems important alsoto study CHQ-specific outcomes, such as the effecton corporate culture (Feldman and Bolino 1998).Third, studies on CHQ relocation often apply cross-sectional designs, which prohibit us from establish-ing causal relationships (e.g. Birkinshaw et al. 2006).

Overall synthesis and futureresearch directions

Although the research in each of the three domainsreviewed here contributes to scholars’ understandingof changes at the CHQ, the collective impact of theextant literature has been limited by its independentdevelopment in separate research areas, each ofwhich has a certain scope in terms of research foci,methods and theories. In addition, research in thethree intellectual domains seems to be in differentstages of development, which are reflected not onlyin the studies’ focal topics, but also in the differentmethods used. For example, while most studies ofphysical change at the CHQ are large-scale empiricalstudies, a considerable number of studies of strategicand organizational-design changes are conceptualand rely on illustrative cases. Furthermore, acommon empirical issue, especially for studies in thestrategic and organizational-design domains, relatesto the limited availability of CHQ-related data.

However, firms have increasingly begun to discloseCHQ information in their annual reports and analystpresentations (e.g. Economist 2014), which offersnew opportunities for empirical research.

Organizing framework for research into changes atthe CHQ

Based on this literature review, we have developedan organizing framework that integrates the extantknowledge in the three research domains (seeFigure 1). The framework reflects the previousstudies’ main variables of interest and the relation-ships between those variables. The purpose of thisframework is to advance a more coherent perspectiveon changes at the CHQ that allows for learning andcross-fertilization of the three previously separateresearch domains, which we hope will stimulatefuture research.

The framework is composed of three components(the rectangles) and four forces (the diamonds).The latter illustrate the nature of the relationshipsbetween the components. The first component cap-tures the antecedents of changes at the CHQ (I).2

These factors arise from both changing and enduringconditions in the firm’s internal and external environ-ments. The internal factors (Ia) can be broadly differ-entiated into: (a) strategic leadership (CEO,TMT), (b)corporate strategy, (c) corporate governance and own-ership, and (d) firm characteristics (e.g. age, size,prior performance). External factors (Ib) can be cat-egorized into factors in (a) the regulatory environ-ment, (b) the market environment and (c) thetechnological environment. As discussed above,extant studies often consider various internal andexternal factors as antecedents of changes at the CHQ.

The second component of the framework incorpo-rates the characteristics of changes at the CHQ alongthe three content domains (II). The strategy domain(IIa) includes changes in the CHQ’s roles andstyles, and in its corporate growth strategies. Theorganizational-design domain (IIb) captures changesin the size and configuration of the CHQ, changes inlevels of formalization and centralization, and thedynamic relationships between the CHQ and theoperating units. The physical domain (IIc) refers tochanges in the CHQ’s (physical) artefacts, such as itslegal domicile and its physical building(s).

The three dimensions of changes at the CHQare interrelated. The strategy domain and the

2The characters in parentheses refer to Figure 1.


372


(II)

CH

AR

AC

TE

RIS

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S(I

II)

OU

TC

OM

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(I)

AN

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DE

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a)

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tco

mes

-C

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leve

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ines

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irm le

vel

(III

b)

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diar

y le

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irm le

vel

(Ia)

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rnal C

on

text

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ship

(C

EO

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T)

-C

orpo

rate

str

ateg

y-

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erna

nce

and

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p-

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cha

ract

eris

tics

(Ib

) E

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nte

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-R

egul

atio

n-

Mar

kets

-T

echn

olog

y

(C)

Ad

ap

tati

on

(D)

Dis

rup

tio

n

(A)

Pre

ssu

re f

or

ch

an

ge

∗

(B)

Resis

tan

ce t

o

ch

an

ge

Inte

r-

rela

tio

nsh

ips,

Acto

rs,

Pro

cesses

(IIb

) O

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n-

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mal

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.g. s

taffi

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(IIc

) P

hysic

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Do

main

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catio

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lom

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uild

ings

(IIa

) S

trate

gy

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main

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Fig

ure

1.O

rgan

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gfr

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ork

for

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onch

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sat

the

CH

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*The

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-sha

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shi

ghli

ght

the

oppo

rtun

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rfu

ture

rese

arch


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organizational-design domain are closely related. Asthe CHQ’s functions and roles translate into theCHQ organizational design (e.g. Collis et al. 2007),scholars often assume a hierarchical relationshipbetween strategy and structure. For example,Amburgey and Dacin (1994) find a reciprocal rela-tionship between strategy and administrative struc-ture, but a hierarchical relationship in terms of themagnitude and timing of these changes, with strategybeing a more important driver of structure thanstructure of strategy. In addition, the organizational-design domain and the physical domain are interre-lated. For example, a change in the geographicallocation of the CHQ represents a change in theCHQ’s proximity to the firm’s operating units andexternal markets (e.g. Laamanen et al. 2012; Landieret al. 2009). The decision to co-locate or geographi-cally separate administrative functions and produc-tions sites (e.g. Henderson and Ono 2008) isimportant for the firm, especially from an informa-tion and decision-making perspective. Finally, thestrategy domain and the physical domain are alsointerrelated. The geographical location of the CHQcarries significant signal value and is publiclyregarded as indicating the ‘nationality’ of thecompany (Laamanen et al. 2012). Hence, a change inthe location of the CHQ has consequences from asignalling point of view and, thus, represents a stra-tegic decision.

Even though there is a substantial amount ofresearch in each of the three domains, there arelimited insights into aspects that may benefit from oreven require cross-fertilization across them. This isparticularly true with respect to the interrelationshipsamong the three domains, the roles of internal andexternal actors, and the processes of change at theCHQ. For example, while research in the strategydomain stresses the crucial role of internal changeagents, such as the CEO and the TMT, in fostering orconstraining changes at the CHQ, change agentshave largely been neglected in the two other domains.In the subsequent section, we discuss these opportu-nities for future research and their potential to con-tribute to understanding of the changes at the CHQ.

The third component of the framework refers tothe outcomes (III). These outcomes can be broadlysplit into intermediate (IIIa) and performance (IIIb)outcomes. They can be further differentiated intooutcomes on the CHQ level, outcomes on theBU/subsidiary level and outcomes on the firm level.Overall, we have little conclusive knowledge aboutthe consequences of changes at the CHQ. While both

intermediate and performance outcomes should bestudied at different levels, there is a notable lack ofempirical research on performance outcomes at theCHQ and BU levels.

The framework’s diamonds portray the dynamicrelationships between these three components. Onthe one hand, the changing and enduring conditionsin the firm’s internal and external environmentscan influence pressure for as well as resistance tochanges at the CHQ (A; B). On the other hand, inter-mediate and performance outcomes arise from theadaption and disruption caused by changes at theCHQ (C; D). We believe that the extent to whichthese four forces affect changes at the CHQ and theiroutcomes – and how they do so – merit further inves-tigation in order to enhance scholars’ understandingof changes at the CHQ. We therefore return to theseforces in our discussion of research opportunities.

High-priority research opportunities

On the basis of our synthesis of the extant research,we have identified five important opportunities forfuture research, as indicated by the grey-shaded areasin the organizing framework (see Figure 1). Specifi-cally, we suggest that scholars focus on improvingour knowledge of: (1) the pressure for and resistanceto changes at the CHQ, (2) interrelationships amongchanges at the CHQ, (3) change processes at theCHQ, (4) agents involved in changes at the CHQ,and (5) adaptive and disruptive effects of changes atthe CHQ. Table 5 provides exemplary research ques-tions for each of these opportunities. When studyingthese and other phenomena described in this section,we encourage scholars to pay close attention to the fitamong the dynamic perspective on the CHQ, thetheories and the research methodology (Bergh 1993;Bergh and Fairbank 2002).

(1) Pressure for and resistance to changes at theCHQ: when do changes occur at the CHQ? Tosubstantiate knowledge of when changes occur at theCHQ, more conceptual and empirical research isneeded on the factors that increase pressure for andresistance to such changes. Studies of the paradox ofstability vs. change at the CHQ are critical forimproving the limited understanding of the triggersof and impediments to changes at the CHQ. Futureresearch can also help resolve inconsistenciesbetween findings from research on strategic changesand findings on other changes at the CHQ. Forexample, research in the strategic domain suggests


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that CHQ inertia exists, while research in theorganizational-design and physical domains does notnecessarily support this notion. Scholars shouldidentify and explore various additional internal andexternal antecedents to a variety of specific changesat the CHQ. Such antecedents may include size,functions and location.

In this vein, one important concern is the extent towhich changes at the CHQ are deterministic or basedon managerial choice. For example, we have littleknowledge of the conditions that lead to the creationof centralized functions, such as HR, IT or market-ing. On the one hand, it is widely believed thatchange is largely driven by institutional forces andthat the firm’s mimetic behaviour affects changes atthe CHQ (DiMaggio and Powell 1983; Ferlie andPettigrew 1996). On the other hand, changes at the

CHQ are typically driven by senior executives fromthe top down (Goold and Luchs 1992), which wouldsupport the managerial-choice perspective. The CHQoffers a compelling context for gaining additionalinsights into these competing views.

(2) Interrelationships among changes at the CHQ:what changes at the CHQ? Our framework indi-cates that changes can affect multiple dimensionsand multiple levels of the CHQ. While the continuedexamination of the individual dimensions of changesat the CHQ is appealing, we believe that studying thelinks between these interrelated dimensions iscrucial for extending the collective knowledge ofwhat changes at the CHQ.

Such research could address important questionsregarding whether change on one level triggers or

Table 5. High-priority opportunities for future research on changes at the CHQ

Research opportunities Exemplary research questions

(1) Pressure for andresistance tochanges at theCHQ

• How inert is the CHQ? Are some CHQ characteristics more inert or stable than others (e.g. artefacts, suchas location or physical attributes, vs. management styles)?

• When and why do firms establish new centralized corporate functions? When do they decentralize or evenshut down existing corporate functions?

• How do different institutional settings and forces affect changes at the CHQ over time? To what extent dobandwagon effects (‘fashions’) influence changes at the CHQ, such as changes in the CHQ design?

• How do shifts in the external environment, such as globalization and the rise of the BRIC countries, affectCHQ relocation decisions?

(2) Interrelationshipsamong changes atthe CHQ

• To what extent are changes at the CHQ interrelated? How do changes in one CHQ dimension triggerchanges in another? Do changes in the various CHQ dimensions occur simultaneously or successively?

• How do CHQ artefact changes serve as a catalyst for other changes at the CHQ?• When and why do corporations decide to relocate rather than redevelop their CHQs? When and why do

firms decide to establish new CHQ types, such as ‘second homes’ or ‘virtual (token) CHQs’?(3) Change processes

at the CHQ• How do changes at the CHQ occur? In other words, how do they unfold over time? Are there different

patterns, cycles or rhythms of changes at the CHQ? Do parts of the CHQ, such as corporate functions, havea life cycle?

• How do specific processes of change at the CHQ, such as initiation, decision-making and implementation,function?

• How do firms reverse change? Does adverse change occur?• What are the internal and external contingencies of the processes of change at the CHQ?

(4) Agents involvedin changes at theCHQ

• Who are the internal and external agents of change at the CHQ? How do they enact changes at the CHQ?• Does the CEO’s prior work experience inside or outside the focal firm, and at the CHQ or business levels

make a difference? What types of CEO succession lead to changes at the CHQ?• To what extent do specific (new) functional executives, such as chief strategy officers, affect changes at the

CHQ? How do they do so?• To what extent do external consultants and other external agents (e.g. activist shareholders) influence

changes at the CHQ? How do they do so? Do external change agents help overcome CHQ inertia? Doexternal agents foster mimetic changes at the CHQ?

(5) Adaptive anddisruptive changesat the CHQ

• When are changes at the CHQ adaptive and when are they disruptive? What are the merits or downsides ofstability at the CHQ?

• What are the intermediate consequences of changes at the CHQ, such as CHQ relocations? How do changesat the CHQ affect CHQ–subsidiary relationships, corporate culture, corporate capabilities and CHQ staffturnover?

• To what extent do decisions related to changes at the CHQ enhance firm performance? How do they do so?How do changes at the CHQ affect a firm’s operating performance and corporate value-added?


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requires changes on other levels. For example, acompany that decides to shift its CHQ from onelocation to another should consider several severestrategic and organizational implications. Forexample, in their study of CHQ relocations, Feldmanand Bolino (1998) explore several factors associatedwith the staff’s willingness to move during corporaterelocations. We believe that there are many otheropportunities to study such links, which could focuson questions such as: How do changes at the CHQserve as a catalyst for organizational change at large?When and why do corporations decide to move ratherthan redevelop their CHQs?

(3) Change processes at the CHQ: how does theCHQ change? Scholars’ understanding of the pro-cesses behind changes at the CHQ and, thus, of thequestion of how the CHQ actually changes, islimited, even though such knowledge is urgentlyneeded. We need to learn more about change patterns(Klarner and Raisch 2013) and various time-relatedaspects (Ancona et al. 2001) of changes at the CHQ.For example, scholars should investigate the evolu-tion of the CHQ as a whole, as well as the evolutionof its parts. Furthermore, we lack knowledge regard-ing changes in specific CHQ elements, such as thehurdles associated with launching and institutional-izing a corporate function within large companies(e.g. Campbell et al. 2011, 2012).

In order to study the process phenomena related tochanges at the CHQ, there is a need for rigorousqualitative research that develops theory and propo-sitions of changes at the CHQ based on rich casestudies. Studies in this vein that focus on specificprocesses of changes at the CHQ – such as changeinitiation, related decision-making and implementa-tion – may lay the groundwork for comprehensiveprocess models and, thus, offer the potential to con-tribute to scholars’ understanding of how changesunfold at the CHQ. Such studies should incorporatepotentially important internal and external contin-gencies, such as the industry’s dynamism and thefirm’s corporate strategy. For example, as priorresearch suggests that the role and design of the CHQdiffer across regions (Collis et al. 2012), the pro-cesses associated with changes at the CHQ may alsodiffer. This, therefore, calls for studies that includecase companies or large-scale data from multiplegeographical regions.

(4) Agents involved in changes at the CHQ: whointroduces change at the CHQ? Another importantarea for future research is the study of the internal

and external agents involved in changes at the CHQand, thus, of those who are engaged in these changes.With respect to internal change agents, futureresearch should further explore the role of the CEOand top management in changes at the CHQ. As theCEO is expected to be a driving force behind avariety of changes at the CHQ, especially when suc-cession occurs (e.g. Goold and Luchs 1992; Gooldet al. 2001; Laamanen et al. 2012), the study ofchanges at the CHQ as an intermediate outcome ofCEO succession appears promising. Such researchmay focus on such questions as: When do CEO suc-cessions lead to alterations in the roles and structuresof the CHQ? Does the new CEO’s prior work expe-rience inside or outside the focal firm and at the CHQor at the business levels make a difference? We alsoencourage scholars to study other agents of change atthe CHQ level, such as heads of corporate functionsand corporate strategists, including, for example,chief strategy officers (Menz and Scheef 2014).Future studies in this area will not only inform under-standing of how changes at the CHQ occur, but mayalso help open the ‘black box’ of how corporatemanagers affect outcomes, particularly those specificto top executives’ roles. They can, therefore, alsocontribute to upper-echelon research (Hambrick2007; Hambrick and Mason 1984; Menz 2012). Webelieve there is great potential for future empiricalwork in this area, especially for large-scale,hypothesis-testing studies.

In addition, while we have at least some know-ledge regarding internal change agents, we knowlittle about the external agents that may affectchanges at the CHQ. For example, external strategyconsultants often take part in large firms’ CHQchanges, as indicated by the frequent studies theypublish on the topic. We therefore encourage schol-ars to explore the role of potentially influential exter-nal change agents, such as consultants and activistshareholders. Studies in this vein should addresssuch questions as the extent to which external con-sultants and other external agents (e.g. activist share-holders) influence changes at the CHQ, and how theyaffect the respective outcomes.

(5) Adaptive and disruptive effects of changes at theCHQ: why does the CHQ change? An examinationof the literature shows that we have little conclusiveknowledge about the consequences of changes at theCHQ and, thus, regarding the question of why a CHQchanges. While there are recurring calls for speci-fic changes at the CHQ, such as downsizing


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(e.g. Economist 2008, 2014), we have hardly anyempirical evidence regarding the consequences ofsuch changes. We therefore encourage scholars toexplore the extent to which decisions related tospecific changes at the CHQ benefit performanceoutcomes, such as a firm’s operating performanceand corporate value-added, and how these benefitsarise. Given the distance between CHQ changes andperformance outcomes, we need to extend knowl-edge of the intermediate consequences of changes atthe CHQ, including their effect on CHQ–subsidiaryrelationships, organizational structures and corporateculture.

Along these lines, the extent to which changes atthe CHQ are adaptive or disruptive also requiresfurther investigation. Studies exploring the CHQ caninform knowledge on the more general puzzle ofwhether organizational change is adaptive or disrup-tive (e.g. Boeker 1997). Stability might ensure con-tinuity of the corporate culture and have otherimportant effects that may allow other parts of theorganizations to change. A few studies on specificCHQ concerns caution that changes at the CHQ canhave severe negative consequences (e.g. Wiersema2002). Therefore, scholars are encouraged to inves-tigate whether and when such changes are beneficial.The insights derived from such studies will also helpfirms diagnose the need for change or stability at theCHQ.

Conclusion

With the rise of large multi-product and multina-tional companies that are confronted with ever-changing environments, corporate managers andmanagement scholars alike have become moreinterested in understanding the conditions andforces that facilitate successful change at the CHQin large, public firms. In this paper, we havereviewed the existing knowledge on changes at theCHQ. We have also developed a framework thatcombines the variety of insights and serves as abasis for directing future research. The frameworkallows for the integration of research from thethree separate tracks of CHQ change: strategicchange; organizational-design change; and physical/geographical change. It thereby helps clarify severalquestions: To what extent do changes occur at theCHQ? On what levels do these changes take placeand in which directions? What triggers or impedesthese changes? What are the consequences of these

changes? It therefore not only provides scholarswith a comprehensive overview of the extantknowledge but also uncovers novel research oppor-tunities. As more research on changes at the CHQis needed to improve scholarly understanding of thecontemporary corporation, we hope that this reviewwill facilitate fellow scholars’ work.

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Supporting information

Additional Supporting Information may be found inthe online version of this article at the publisher’swebsite:

Table S1. Journal overviewFigure S1. Sample of works considered for thisreview by domain and year


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Documents

Changes at Corporate Headquarters: Review, Integration and ... · Changes at Corporate Headquarters locations and relationships with subsidiaries (e.g. Kramer 1999; Kunisch et al