Global Cities, Connectivity, and the Location Choice of MNC Regional Headquarters

Abstract

Regional headquarters (RHQs) perform a crucial bridging function between corporate headquarters, regional affiliates, and other regional actors. Their bridging role and associated connectivity needs lead MNCs to locate their RHQs in highly connected ‘global cities’. We examine how the interplay between global city connectivity, geographic distance, and RHQ roles determine the likelihood that particular cities are chosen as a location for MNCs’ RHQ investments. Our inferences are based on an analysis of location choices for 1031 RHQs among 48 global cities. We find that while the geographic distance of a global city to the MNC's regional affiliates diminishes the likelihood that a given city is chosen, these distance effects disappear when the global city is highly connected. Well connected global cities, furthermore, attract investment in RHQs by MNCs from more distant countries-of-origin. On average, city connectivity is a more important characteristic for RHQs that have an entrepreneurial role.