The Size and Composition of Corporate Headquarters in Multinational Companies: Empirical Evidence

Abstract

Based on a six-country survey of nearly 250 multinationals (MNCs), this paper is the first empirical analysis to describe the size and composition of MNC headquarters and to account for differences among them. Findings are as follows: MNC corporate headquarters are more involved in "obligatory" and value creating and control functions than in operational activities; there are no systematic differences in the determinants of the size and composition of corporate headquarters between MNCs and purely domestic companies; and as the geographic scope of an MNC increases, two offsetting phenomena occur—headquarters decrease their influence over operational units that, ceteris paribus, reduces the size of headquarters, but the relative size of obligatory functions at headquarters increases with increased country heterogeneity. The net effect is that the size of corporate headquarters expands as MNC geographic scope increases. The notion of "administrative heritage" is validated as MNCs from different countries have substantially different corporate headquarters—U.S. headquarters are large (255 median staff for a 20,000 FTE MNC) and European headquarters smaller (124). Implications are drawn that countries will lose activities if domestic firms are acquired by foreign MNCs, and that MNCs need to allow more subsidiary autonomy as their geographic scope increases.