Multinational corporations (MNCs) have increasingly been establishing regional headquarters in China. However, no study has systematically examined how MNCs make strategic decisions about where to locate Chinese headquarters (CHQs) in this transition economy. The paper makes the first attempt to investigate the issue by focusing on two questions. First, what are the location-specific factors that determine where MNCs locate their CHQs? Second, how do these factors influence making the decision between Beijing and Shanghai, the two largest cities in China? We integrate existing literature and assess the differential roles of (1) path dependency, (2) institutional support, and (3) proximity to superior information. Data were collected through a large-scale survey of MNC CHQs in mainland China. The empirical analysis supports the three-dimensional framework and the central role of proximity to superior information in the decision-making process. The results advance existing understanding of MNC location decisions in China by revealing the unique interplay between power and market in this transition economy, and between Beijing and Shanghai, the two promising cities toward world city status, in particular.
Get full access to this article
View all access options for this article.
References
1.
AraujoLRezendeS, 2003, “Path dependence, MNCs and the internationalisation process: A relational approach”International Business Review12719–737.
2.
BartlettC AGhoshalD, 2002Managing Across Borders: The Transnational Solution2nd edition (Harvard Business School Press, Boston, MA).
3.
BaronR MKennyD A, 1986, “The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations”Journal of Personality and Social Psychology511173–1182.
4.
BirkinshawJBraunerhjelmPHolmUTerjesenS, 2006, “Why do some multinational corporations relocate their headquarters overseas?”Strategic Management Journal27681–700.
5.
BoisotMChildJ, 1996, “From fiefs to clans and network capitalism: Explaining China's emerging economic order”Administrative Science Quarterly41600–628.
6.
BrislinR W, 1970, “Back-translation for cross-cultural research”Journal of Cross-Cultural Psychology1185–216.
7.
BuckleyP JGhauriP N, 2004, “Globalisation, economic geography and the strategy of multinational enterprises”Journal of International Business Studies3581–98.
8.
CantwellJ, 2009, “Location and the multinational enterprise”Journal of International Business Studies4035–41.
9.
CantwellJNarulaR, 2001, “The eclectic paradigm in the global economy”International Journal of the Economics of Business8155–172.
10.
CavesR E, 1996Multinational Enterprise and Economic Analysis (Cambridge University Press, Cambridge).
11.
DanielsP WLeyshonAThriftN J, 1988, “Trends in the growth and location of professional producer services: UK property consultants”Tijdschrift voor Economische en Sociale Geografie79162–174.
12.
DavisJ CHendersonJ V, 2008, “The agglomeration of headquarters”Regional Science and Urban Economics38445–460.
13.
DerudderBTaylorP JWitloxFCatalanoG, 2003, “Hierarchical tendencies and regional patterns in the world city network: A global urban analysis of 234 cities”Regional Studies37875–886.
14.
DickenP, 2003Global Shift: Reshaping the Global Economic Map in the 21st Century4th edition (Sage, Thousand Oaks, CA).
15.
DickenPKirkpatrickC, 1991, “Services-led development in ASEAN: Transnational regional headquarters in Singapore”The Pacific Review4174–184.
16.
DunningJ H, 1977, “Trade, location and economic activity and the multinational enterprise: A search for an eclectic approach”, in The International Allocation of Economic Activity Eds OhlinBHesselbornPWijkmanP (Macmillan, London) pp 395–418.
17.
DunningJ H, 1988, “The eclectic paradigm of international production—a restatement and some possible extensions”Journal of International Business Studies191–31.
18.
DunningJ H, 1993Multinational Enterprises and the Global Economy (Addison-Wesley, Wokingham, Berks).
19.
DunningJ H, 1998, “Location and the multinational enterprises: A neglected factor?”Journal of International Business Studies2945–66.
20.
DunningJ H, 2000, “The eclectic paradigm as an envelope for economic and business theories of MNE activity”International Business Review9163–190.
21.
DunningJ H, 2001, “The eclectic (OLI) paradigm of international production: Past, present and future”International Journal of the Economics of Business8173–190.
22.
DunningJ H, 2004a, “Determinants of foreign direct investment: Globalization-induced changes and the role of policies”, in Towards Pro Poor Policies Eds TungoddenBSternNKolstadI (World Bank, Washington, DC) pp 279–290.
23.
DunningJ H, 2004b, “An evolving paradigm of the economic determinants of international business activity”, in Managing Multinationals in a Knowledge Economy: Economics, Culture and Human Resources Eds ChengJ LCHittA (Elsevier, Amsterdam) pp 3–28.
24.
DunningJ H, 2006, “Towards a new paradigm of development: Implications for the determinants of international business”Transnational Corporations15173–227.
25.
DunningJ HLundanS M, 1998, “The geographical sources of competitiveness of multinational enterprises: An econometric analysis”International Business Review7115–133.
26.
DunningJ HLundanS M, 2008Multinational Enterprises and the Global Economy (Edward Elgar, Cheltenham, Glos).
27.
DunningJ HRobsonP, 1987, “Multinational corporate integration and regional economic-integration”Journal of Common Market Studies26103–125.
28.
EIU, 2005China Hand: The Complete Guide to Doing Business in ChinaEconomist Intelligence Unit, http://www.EIU.com.
29.
ErikssonKMajkgardASharmaD D, 2000, “Path dependence and knowledge development in the internationalization process”Management International Review40307–328.
30.
GasparJGlaeserE L, 1998, “Information technology and the future of cities”Journal of Urban Economics43136–156.
31.
GertlerM S, 2003, “Tacit knowledge and the economic geography of context, or the undefinable tacitness of being (there)”Journal of Economic Geography375–99.
32.
GertlerM S, 2010, “Rules of the game: The place of institutions in regional economic change”Regional Studies441–15.
33.
GodfreyB JZhouY, 1999, “Ranking world cities: Multinational corporations and the global urban hierarchy”Urban Geography20268–281.
34.
GongC, 2002, “Transnational corporate investment in China”Business World2276–79.
35.
GrosseRTrevinoL, 1996, “Foreign direct investment in the United States: An analysis by country of origin”Journal of International Business Studies27139–155.
36.
HeC, 2003, “Location of foreign manufacturers in China: Agglomeration economies and country of origin effects”Papers in Regional Science82351–372.
37.
HeenanD A, 1979, “The regional headquarters decision: A comparative analysis”Academy of Management Journal2247–62.
38.
HeniszW, 2000, “The institutional environment for multinational investment”Journal of Law, Economic, and Organization16334–364.
39.
HewettKRothM SRothK, 2003, “Conditions influencing headquarters and foreign subsidiary roles in marketing activities and their effects on performance”Journal of International Business Studies34567–585.
40.
HillmanA JKeimG DSchulerD, 2004, “Corporate political activity: A review and research agenda”Journal of Management30837–858.
41.
HoK C, 1998, “Corporate regional functions in Asia Pacific”Asia Pacific Viewpoint39179–191.
42.
HoskissonR EEdenLLauC MWrightM, 2000, “Strategy in emerging economies”Academy of Management Journal43249–267.
43.
HutzschenreuterTPedersenTVolberdaH W, 2007, “The role of path dependency and managerial intentionality: A perspective on international business research”Journal of International Business Studies381055–1068.
44.
KogutB, 1983, “Foreign direct investment as a sequential process”, in The Multinational Corporation in the 1980s Eds KindlebergerC PAudretschD B (MIT Press, Cambridge, MA) pp 38–56.
45.
KrugmanP, 1995Development, Geography and Economic Theory (MIT Press, Cambridge, MA).
46.
KwanY KChengL K, 2000, “What are the determinants of the location of foreign direct investment? The Chinese experience”Journal of International Economics51379–400.
47.
LeyshonAThriftN, 1997Money/Space: Geographies of Monetary Transformation (Routledge, London).
48.
LiSParkS H, 2006, “Determinants of locations of foreign direct investment in China”Management and Organization Review295–119.
49.
LiSLiSZhangW, 2000, “The road to capitalism: Competition and institutional change in China”Journal of Comparative Economics28269–292.
50.
LovelyM ERosenthalS SSharmaS, 2005, “Information, agglomeration, and the headquarters of US exporters”Regional Science and Urban Economics35167–191.
51.
MaXDeliosA, 2007, “A new tale of two cities: Japanese FDIs in Shanghai and Beijing, 1979–2003”International Business Review16207–228.
52.
McCannPAritaTGordonI R, 2002, “Industrial clusters, transactions costs and the institutional determinants of MNE location behaviour”International Business Review11647–663.
53.
MartinRSunleyP, 2006, “Path dependence and regional economic evolution”Journal of Economic Geography6395–437.
54.
MeyerK ENguyenH V, 2005, “Foreign investment strategies and sub-national institutions in emerging markets: Evidence from Vietnam”Journal of Management Studies4263–93.
55.
NeeV, 1992, “Organizational dynamics of market transition: Hybrid forms, property rights and mixed economy in China”Administrative Science Quarterly371–27.
56.
NorthD, 1990Institutions, Institutional Change and Economic Performance (Cambridge University Press, Cambridge).
57.
OldsK, 1997, “Globalizing Shanghai: The ‘global intelligence corps’ and the building of Pudong”Cities14109–123.
PerryM, 1995, “New corporate structures, regional offices and Singapore's new economic directions”Singapore Journal of Tropical Geography16181–196.
60.
PorteousD, 1995The Geography of Finance: Spatial Dimensions of Intermediary Behaviour (Avebury, Aldershot, Hants).
61.
PorterM E, 1996, “Competitive advantage, agglomeration economies, and regional policy”International Regional Science Review1985–94.
62.
PorterM E, 2000, “Locations, clusters, and company strategy”, in The Oxford Handbook of Economic Geography Eds ClarkG LFeldmanMGertlerM (Oxford University Press, Oxford) pp 253–274.
63.
RiceM DPoolerJ A, 2009, “Subsidiary headquarters: The urban geography of the ‘second tier’ of corporate decision-making activity in North America”Urban Geography30289–311.
64.
RugmanA MVerbekeA, 2004, “A perspective on regional and global strategies of multinational enterprises”Journal of International Business Studies353–18.
65.
SassenS, 2001The Global City: New York, London, Tokyo2nd edition (Princeton University Press, Princeton, NJ).
66.
SchlevogtK-A, 2001, “Institutional and organizational factors affecting effectiveness: Geoeconomic comparison between Shanghai and Beijing”Asia Pacific Journal of Management18519–551.
67.
ShiYHamnettC, 2002, “The potential and prospect for global cities in China: In the context of the world system”Geoforum33121–135.
68.
SpicerJ, 2004Making Sense of Multivariate Data Analysis (Sage, Thousand Oaks, CA).
69.
StiglitzJ E, 1996Whither Socialism? (MIT Press, Cambridge, MA).
70.
StoianCFilippaiosF, 2008, “Dunning's eclectic paradigm: A holistic, yet context specific framework for analysing the determinants of outward FDI: Evidence from international Greek investments”International Business Review17349–367.
71.
TaylorP JCatalanoGWalkerDRF, 2002, “Measurement of the world city network”Urban Studies392367–2376.
72.
VernonR, 1974, “The location of economic activity”, in Economic Analysis and the Multinational Enterprise Ed. DunningJ H (Allen and Unwin, London) pp 89–114.
73.
WalderA G, 1995, “Local governments as industrial firms: An organizational analysis of China's transition economy”American Journal of Sociology101263–301.
74.
WalderA GLiBTreimanD J, 2000, “Politics and life chances in a State socialist regime: Dual career paths into the urban Chinese elite, 1949 to 1996”American Sociological Review65191–209.
75.
XuC, 2011, “The fundamental institutions of China's reforms and development”Journal of Economic Literature (forthcoming).
76.
YeungH WPoonJPerryM, 2001, “Towards a regional strategy: The role of regional headquarters of foreign firms in Singapore”Urban Studies38157–183.
77.
ZhaoH, 2005Blue Book of China's Headquarters Economy: 2005–2006 (Social Sciences Adademic Press, Beijing).
78.
ZhaoS XZhangLWangD T, 2004, “Determining factors of the development of a national financial centre: The case of China”Geoforum35577–592.
