Leaving home: An institutional perspective on intermediary HQ relocations

Abstract

We investigate the effect of changing national institutions on relocations of intermediary HQs. Using a dataset of 154 cross-border relocations between the period from 2000-2015, we draw on the intermediary HQ's middle position within the MNC and investigate how a decrease in institutional quality in the HQ's host country and a change in institutional distance between different MNC units affect the relocation decision. Our findings advance the emergent literature on HQ relocations as well as our knowledge of intermediary HQs and the effect of changing institutions on organizational location choices. Beyond our theoretical contributions, we offer policy and managerial implications.

Conceptualizing and measuring distance in international business research: Recurring questions and best practice guidelines

“…Second, in samples of only one home or one host country, distance effects are conflated with level effects (Brouthers et al, 2016;Harzing & Pudelko, 2016;Van Hoorn & Maseland, 2016;Sivakumar & Nakata, 2001). In such a sample structure, there can be a high negative or positive correlation between the distance from a home country to other countries and the level score of the construct on which the distance is calculated.…”

“…10 As mentioned earlier, additional distance constructs have been developed to complement cultural distance, often measured by applying the Kogut and Singh approach. One of these is institutional distance (Eden & Miller, 2004;Malhotra & Gaur, 2014;Xie & Li, 2017;Xu & Shenkar, 2002), which has been measured using a variety of databases, including the Quality of Governance database (QoG; also referred to as World Governance Indicators) developed by the World Bank (e.g., Kaufmann, Kraay, & Mastruzzi, 2008;Abdi & Aulakh, 2012;Ang, Benischke, & Doh, 2015;Campbell et al, 2012;Hutzschenreuter et al, 2014;Li, Liu, Wright, & Filatotchev, 2014;Salomon & Wu, 2012), the Economic Freedom Index (EFI) provided by the Heritage Foundation (e.g., Demirbag, Apaydin, & Tatoglu, 2011;Gubbi, Aulakh, Ray, Sarkar, & Chittoor, 2010;He, Brouthers, & Filatotchev, 2013), and the International Country Risk Guide (ICRG) developed by the Political Risk Services group (e.g., Makino & Tsang, 2011;Valentino, Schmitt, Koch, & Nell, 2018).…”

“…In this editorial, we address recurring disagreement on theory, methods, data, and the relationship between different distance dimensions, complementing and updating existing editorials (Beugelsdijk & Mudambi, 2013;Zaheer et al, 2012), commentaries (Brouthers, Marshall & Keig, 2016;Van Hoorn & Maseland, 2016), debates (Cuypers et al, 2018;Maseland, Steel, & Dow, 2018), and surveys of distance research (Berry, Guillen, & Zhou 2010;Hutzschenreuter, Kleindienst, & Lange, 2014;Shenkar, 2001;Tung & Verbeke, 2010). We then make a series of recommendations which we believe will help achieve convergence in research practice.…”

The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations

“…Lindner, Muellner, and Puck's (2016) study, which uses four of the nine dimensions related to the regulatory and normative domains, exemplifies the typical application. There are also studies that select one dimension, mostly administrative distance (e.g., Ahrens et al, 2018;Brown, Yaşar, & Rasheed, 2018; or various subsets as control variables (e.g., Schwens, Zapkau, Brouthers, & Hollender, 2018;Valentino, Schmitt, Koch, & Nell, 2018). None of these studies, however, are clearly positioned in the comparative institutionalism theoretical tradition, because they do not theorize at the level of the configuration.…”

FDI, Institutional Quality, and Bribery: An Empirical Examination in China

“…Such institutional factors often influence various domains and territories associated with MNE operations, and one example may include an MNEs' location decision and activity. For instance, Valentino and his colleagues [13] argue that a deterioration of a host country's institutional quality tends to increase the propensity to relocate the investment location. In contrast, an increase in the institutional distance between the host market and the home country of corporate headquarters does not force MNEs to relocate their subsidiaries to another country.…”