Should Top Management Relocate Across National Borders?

In today’s increasingly international world, it’s not uncommon for multinational companies to move some element of their headquarters to another country. Here’s how to evaluate the strategic costs and benefits of such decisions.

A desire to be close to its major global customers led Halliburton Co., an international oil services group, to relocate the company’s CEO from its headquarters in Houston, Texas, to Dubai in the United Arab Emirates.

Image courtesy of Flickr user utpal.

International relocations of entire corporate headquarters are a rare phenomenon. But the relocation of elements of headquarters — such as the offices of top management team members, core functions like finance, R&D or shared services — is happening more and more, triggered by the increasing internationalization of markets and industries. At present, international relocations of corporate headquarters elements can most clearly be observed — as a kind of early warning — in highly internationalized, small, open economies, such as Finland, Sweden and the Netherlands, that traditionally host a relatively high number of multinationals’ corporate headquarters. However, multinationals currently hosted in larger countries are also affected by increasing levels of internationalization.

The international oil services group Halliburton Co. offers an example. In 2007, the globalization of Halliburton’s markets and industry led Halliburton to shift its business focus from the United States to the Middle East. The desire to be close to its major global customers — national oil companies in the Eastern Hemisphere — and the oil industry’s center of gravity (the Eastern Hemisphere accounts for three-quarters of proven fossil fuel reserves) drove the decision to relocate Halliburton’s CEO from headquarters in Houston to Dubai in the United Arab Emirates. Other elements of the headquarters remained in Houston.

We researched corporate headquarters decisions of the 100 largest multinational corporations headquartered in the Netherlands, which has one of the world’s most internationalized economies, making it an excellent country in which to investigate this trend. Fifty-eight Dutch multinationals participated in our survey, including Fortune Global 500 corporations such as Royal Dutch Shell, ING Group, Royal Philips Electronics, Unilever and Heineken. Our survey results indicate that 57% of the participating multinationals have already internationally relocated elements of their headquarters. Furthermore, 67% intend to start or to continue relocating within the next five years.

The research on which this article is based was both qualitative and quantitative.

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Acknowledgments

The authors thank George S. Yip, Koen H. Heimeriks and Patrick Reinmoeller for their valuable feedback on this article.

1 Comment On: Should Top Management Relocate Across National Borders?

  • michaelqazqaz | December 27, 2011

    I’m surprised the tax benefits of relocating the entrepreneurial aspects of businesses from high tax rate to low tax rate locations was not covered in this article.

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