Conventional wisdom suggests that in an era of global
competition, multinational enterprises (MNEs) can no longer
afford to have "kings of countries", leading to the removing
of their host country headquarters (HCHQ) in developed
countries. However, HCHQ has been increasingly adopted
by many MNEs in large and important emerging markets
such as China. In a research project supported by GRF from
RGC (Project Reference: 451311), Professor Xufei MA (PI, Business School, The Chinese University of Hong Kong (CUHK)), together
with Professor Andrew DELIOS (Co-I, National University of
Singapore) and Professor Chung-Ming LAU (Co-I, also from
CUHK), examined the location choice of foreign MNEs’ HCHQ
in China.
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Beijing CBD (Central Business District) |
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It is not surprising that many foreign MNEs have chosen either Beijing or Shanghai as the
location for their China HQ, given the two cities’ superior status, social and economic
development, human capital, and physical infrastructure. However, significant differences
also exist between these two cities. Beijing is the political center (i.e., Di Du in Chinese, meaning
the capital emperor lives in), but Shanghai is the business center (i.e., Mo Du in Chinese,
meaning the capital full of magic). Beijing is more influenced by China’s traditional cultural
values, but Shanghai is a more foreign-oriented, modern, and westernized city. Geographically,
Beijing is located in the north, while Shanghai is in the south.
Indeed, a more intriguing question is to choose Beijing or Shanghai for MNEs’ HCHQ. According to their paper, published
in Journal of International Business Studies (a leading journal in the international business field), an MNE’s China HQ is jointly
determined by the interplay between the strategic roles of HCHQ in MNE’s organizational space and the strategic positions
of the candidate city in China’s institutional/geographic space. Using a sample of Fortune Global 500 firms in China from
1979 to 2005, they have three major findings. First, if an MNE operates in industries highly regulated by the government
or requiring global integration, it would choose Beijing as the HCHQ location so that the corporate ambassador role could
be better leveraged to buffer potential intervention from China’s central government. Second, as the HCHQ is an MNE’s
local administrator to manage the totality of subsidiaries in China, being close to the center of an MNE’s portfolio of local
subsidiaries does matter. Third, to choose a desirable location to fulfill the learning center role of an MNE’s HCHQ, the MNE
would consider the administrative styles/cultural values of its home country, China, and Beijing/Shanghai. |
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The study contributes to international business research as it fills out a research gap by examining the location choice of an
MNE’s HCHQ. The Beijing–Shanghai dichotomous geographic outcome is also of interest to host country policymakers, as
other such pairings, such as New York vs Washington, Mumbai vs New Delhi, St. Petersburg vs Moscow, and Sao Paulo vs
Brasilia, could also be explored to help understand the institutional idiosyncrasies of these cities. The findings also provide
insights for multinational managers by highlighting the simultaneous consideration of organizational, institutional, and
geographic space for their location choice.
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Prof Xufei MA |
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Prof Chung-ming
LAU |
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Prof Andrew
DELIOS |
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Dr Xufei MA
Department of Management
The Chinese University of Hong Kong
xufei@cuhk.edu.hk
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