Serving Two Masters: Conflicts of Interest in Intermediary HQ Relocation Decisions?

How do intermediary headquarters (IHQs) deal with changes in the scope of the multinational corporation (MNC) and in country conditions? To investigate this question, we created a unique panel dataset of 386 IHQ cross-border relocations in Europe between 2000 and 2019. Drawing on extant literature on MNC structures and HQ location choices, we argue that IHQs’ special role as ’hybrid’ units with a middle position between the subsidiaries and the corporate parent puts (potentially) opposing pressures on IHQs. We hypothesize that increasing distance between the IHQ and the frontline subsidiaries as well as between the IHQ and the corporate parent is detrimental for IHQs. We also suggest that IHQs are especially pulled towards countries with highly developed institutions. We find that higher distance between the IHQ and the subsidiaries is related to a higher likelihood of IHQ relocations and that IHQs relocate to countries with a higher institutional quality than their previous host country. In contrast, the distance between the IHQ and the corporate parent does not influence IHQ relocation decisions. With those findings, we contribute to literature on the antecedents of HQ relocations, IHQ structures and configurations in MNCs, and intra-firm networks.