Explaining Mandate Loss of Regional Headquarters: The Difference between Full and Partial Loss

Abstract

The fluidity of regional headquarters (RHQ) mandates is a core aspect of disaggregating HQ activities in MNCs. While 'slicing' of global value chains has received attention in previous research, the parallel disaggregation of management activities has not. Our longitudinal study of 374 RHQ between 1998 and 2010 redresses this omission by asking why RHQ lose their mandates. We apply the concept of absorptive capacity and find two different explanatory mechanisms for full and partial mandate loss driven by RHQ-specific capabilities and location-specific capabilities. Full mandate loss is associated with deficient RHQ-specific capabilities and realised absorptive capacity. By contrast, partial mandate loss is driven by an RHQ's lack of the location-specific capabilities to respond to local changes, leading to removal of mandates for some subunits only. The distinction between full and partial loss offers a more nuanced and granular explanation of how geographic regions of MNCs are composed.

Reconceptualising Hierarchies: The Disaggregation and Dispersion of Headquarters in Multinational Corporations

“…The paper contributes to an improved understanding of the antecedents of headquarters dispersion from points of view of contingency and information processing theories with a special focus on spatial transaction costs. It also complements the other papers in the Special Issue that are interested in the understanding of regional headquarters (Alfoldi et al, (); Kähäri et al, ()).…”

“…The articles by Schotter et al (), Alfoldi et al (), and Kähäri et al () are related in that they focus on some of the key dynamics regarding the use of regional headquarters, regional management centres, and regional management mandates as part of the overall headquarters system. Collectively, they highlight three interesting aspects of the phenomenon.…”

“…Collectively, they highlight three interesting aspects of the phenomenon. While Schotter et al () discuss the antecedents for the choice of the different forms of regional management centres, Alfoldi et al () focus on the sense‐making, co‐construction, and power dynamics associated with the management of such regional management mandates, and Kähäri et al () show how the mandates can also be lost either fully or partially. Although the papers build on different theories, collectively they demonstrate well the dynamics associated with the different stages in the life‐cycle of an intermediary headquarter unit.…”

“…Finally, Kähäri et al () examine in their paper entitled ‘ Explaining mandate loss of regional headquarters: The difference between full and partial loss ’ the dynamics underlying the loss of regional headquarters mandates that were allocated to Finish affiliates. Making use of unique data covering the 1998 to 2010 period, they distinguish between full and partial mandate losses.…”

“…They cover the different stages of the headquarters disaggregation and dispersion process from antecedents to disaggregation and dispersion dynamics, management of the headquarters system and, to some extent, also outcomes, although there were no papers that would have addressed the performance outcomes on the overall headquarters system level. Alfoldi et al () and Kähäri et al () addressed these well on the regional headquarters and subsidiary levels, but more research would be still needed also on the headquarters system level.…”