For much of the 20th century, most western multinationals had two

somewhat separate identities: a vast multicultural, multi-country

enterprise that stretched around the world, and a home office that

tended to be very homogenous and even somewhat cosy, like the

capital city of a sprawling empire

Baaij, M.G. (Marc)

Baaij, Marc

EUR Research Repository

ROTTERDAM SCHOOL OF MANAGEMENT, ERASMUS UNIVERSITYThe business school that thinks and lives in the future Can brain responses to movie trailers predict success?By Maarten A.S. Boksem  Why are so many  Dutch companies  relocating abroad?By Marc G. Baaij  Pride and fear during major organisational changeBy Cees van Riel and Guido Berens The value of big data  to big portsBy Rob Zuidwijk  A psychological lens on the acquisition  processBy Taco Reus  Cloud computing: pushing the right managerial buttonsBy Saeed Khanagha 2nd Quarter 2015Management Knowledge         RSM DISCOVERYwww.rsm.nl/discovery that unlike most corporate decisions, such as relocating a factory or chang-ing a vendor, a headquarters move affects the executive team directly. Often, it represents a major person-al commitment: it’s one thing, for in-stance, to take an expat post in China for a year or two, and quite another to decide to spend the rest of your ca-reer in another country, far from home. For another, it seemed like a new stage in the internationalisation of compa-nies – the advent of a world of truly global companies.When I returned to university to teach, I looked into this issue more and found that although many schol-ars have investigated multinational management practices in some detail, they know surprisingly little about how companies make this kind of relocation decision. To find out more, my colleagues and I invited the top executives of each of the top 100 Dutch multi-national cor-porations (MNCs) to fill out a survey. In all, 58 CEOs and their chief officers in four functional areas (finance, technol-ogy, procurement and human resource management) filled out surveys, and many of them also made themselves available for interviews.Initially, we expected to find rela-tively few companies ready to leave the Netherlands. Except in certain extreme situations, such as a major merger, who would want to go to the trou-ble of moving their headquarters to a new country? At first, this did seem to be the case. However, as we began to learn more, we realised that if you looked at the of the 100 largest Dutch companies are moving or are planning to move some of their core head office func-tions abroad. Stay or go?I first became aware of this trend sev-eral years ago, in a previous position at a strategy consultancy firm. The CEO of a Dutch company asked the consul-tancy to advise him on whether the company headquarters should relocate to the US. They had recently made a major acquisition in the US, and the new company’s centre of gravity had shifted there. It was a bold move, and it interested me for a number of reasons. One was There were often good economic rea-sons for this cultural division: the east-ern and southern parts of the world tended to be an important source of raw materials, while the west and north were the home of capital, skilled labour, and customers. But now that more and more companies find that their most promising markets are in the east, along with some of their most promis-ing talent and the fastest-growing pool of investors, the reasons for keeping corporate headquarters (CHQ) in the west are suddenly much less clear.In a recent study I conducted with my RSM colleagues Tom J.M. Mom, Frans A.J. Van den Bosch, and Henk W. Volberda, we found that many 08   |   2nd Quarter 2015Why are so many Dutch companies relocating abroad?By Marc G. BaaijFor much of the 20th century, most western multinationals had two somewhat separate identities: a vast multicultural, multi-country enterprise that stretched around the world, and a home office that tended to be very homogenous and even somewhat cosy, like the capital city of a sprawling empire.Management KnowledgeRSM DISCOVERY“…geographical colocation is not a law of nature, particularly in this era of free and instantaneous global communication.”head office as a conglomeration of three distinct groups – the executive team, core staff functions, and the company’s legal home – the picture looked very different: 57 per cent of the corporations in our study have re-located one or more parts of their CHQ abroad, and within five years, 71 per cent of executives polled say, they will have sent at least one of their functions out of the Netherlands. We also found that a few more core staffers have been relocated than ex-ecutive managers – 43 per cent to 41 per cent. This balance may shift, how-ever, over the next five years. Sixty per cent of executives surveyed say they expect their executive teams to be re-located, while 48 per cent expect more core staff to be sent abroad.Rather than making a shift abroad in one giant step, companies are mov-ing incrementally. The changes seem to be more like something I’ve seen at a major Dutch company that still keeps its big office headquarters here: al-though the façade is the same and the company’s logo is still on the building, the offices keep getting emptier – that is, those that have not been leased out to other tenants – as more of its key ex-ecutive operational functions are being sent elsewhere.So far, none of the corpora-tions within our sample have re-located their entire headquarters. However, the number of companies that have moved one or two of the three functions abroad has grown, and 5 per cent of respondents in-tend to move all three functions over the next five years, at which point they will effectively become non- Dutch companies.Why relocate?A number of factors encourage execu-tives to send particular functions away: either to get closer to strategic stake-holders, to gain better access to key resources (including capital, talent, and industry-specific services), or for tax or regulatory advantages.Often, such moves are made in or-der to keep up with a major change in the market. For example, one execu-tive told us, ‘Our top-line growth has to come almost exclusively from emerg-ing markets. In five years’ time the majority of our sales will be from non-western markets. How are we going to realise that ambition with a CHQ that is almost completely staffed with home country natives who operate from an office in the home country?’Few managers now assume that they need to keep all the core func-2nd Quarter 2015   |   09www.rsm.nl/discovery log on to a company website as when they walk in through the front door of a headquarters building? Will staff be able to feel close to a company that is more or less in constant motion?  Marc Baaij is Associate Professor of Strategic Management, Department o f  S t ra teg ic  Management  and Entrepreneurship, Rotterdam School of Management, Erasmus University.  EMAIL   mbaaij@rsm.nlThis article is based on the paper Why do multinational corporations relocate core parts of their corporate headquar-ters abroad?, written by Marc G. Baaij, Tom J.M. Mom, Frans A.J. Van den Bosch, Henk W. Volberda and published in the journal Long Range Planning 48 (2015) 46–58. DOI: http://dx.doi.org/10.1016/j.lrp.2012.07.001ciency advantages to being a fully glob-al enterprise are too great. This does not necessarily mean that every Dutch C-suite will be on the next nonstop from Schiphol to Shanghai, nor that those functions will find a new permanent home. Instead, over time, our research suggests that boards will treat the lo-cation of MNC executive functions like any other corporate asset, and subject it to a continuous, dispassionate review. These relocations also raise some important questions for managers and management scholars. What will hap-pen to corporate cultures if executive functions are no longer geographical-ly centralised? How much more diffi-cult will it be to create a strong culture when so many employees no longer spend their entire working life with one company or even in one building? Will employees feel as loyal when they “Despite these challenges, we expect to see the lights continue to go out one by one in corporate headquarters all over the Netherlands.”Management KnowledgeRSM DISCOVERYtions of their executive leadership in the MNC’s home country; after all, geo-graphical colocation is not a law of na-ture, particularly in this era of free and instantaneous global communication. Moving core aspects of the central of-fice overseas may bring strategic ben-efits to the MNCs.But even if a move makes sense on paper, sending functions abroad is a big decision. ‘You cannot just pick up your headquarters and expect all of your talents to go with you,’ one ex-ecutive said. Many key staff members won’t necessarily follow. Legal barriers and domestic political considerations may also make relocation more costly than it might appear.Despite these challenges, we expect to see the lights continue to go out one by one in corporate headquarters all over the Netherlands. The cost and effi- RSM ExpertiseThe Department of Strategic Management & Entrepreneurship at RSM offers unparalleled expertise in a wide range of areas of importance to managers and scholars. These areas are grouped under the themes of strategic management, strategic entrepreneurship, and global strategy. More information about the department and its work can be found at:      WEB   www.rsm.nl/sme

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Why are so many Dutch companies relocating abroad?

For much of the 20th century, most western multinationals had two
\nsomewhat separate identities: a vast multicultural, multi-country
\nenterprise that stretched around the world, and a home office that
\ntended to be very homogenous and even somewhat cosy, like the
\ncapital city of a sprawling empire

Erasmus University Digital Repository

https://pure.eur.nl/files/47604806/RSM_Discovery_22_Relocating.pdf

Why are so many Dutch companies relocating abroad?

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