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  Shanghai CBD (Central Business District)  
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.

  Beijing CBD (Central Business District)  
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.
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.

  Prof Xufei MA  
  Prof Chung-ming LAU  
  Prof Andrew DELIOS  

Dr Xufei MA
Department of Management

The Chinese University of Hong Kong