Two heads are better than one: Determinants of European MNC's headquarters dispersion in their home region

This study examines the relationship between the complexity of the international activities of European multinational corporations (MNCs) and the regional dispersion of their headquarters (HQ) systems within their home region. To explore this, we assess both external complexity (related to MNC’ exposure to different markets) and internal complexity (the nature of the value chain and activities carried out by the MNC) and analyze their effects on headquarters dispersion. Theoretically, we draw on Information Processing Theory, which recognizes that higher value-added activities (e.g., R&D, marketing) are inherently more complex to manage. As a result, strategic responses to this complexity influence the structure of the headquarters system. Our hypotheses are tested using a sample of 554 new foreign HQ investments by European companies. The findings suggest that the level of complexity drives the regional dispersion of headquarters systems. From an academic standpoint, we operationalize the complexity of multinational corporations, particularly focusing on internal complexity by considering the characteristics of the value chain and subsidiary activities. Additionally, we connect both internal and external complexity at the regional level to the strategic response of headquarters dispersion from an empirical perspective. Finally, our study suggests that following the regionalization of value chains, headquarters may be reorganized geographically, which is also a topic of interest for policymakers.