Where do international firms locate their headquarters?

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
School of Business | Master's thesis
Degree programme
81 + 8
The last decades have seen an increasing trend of high-growth firms and established multinationals looking across country borders to find the optimal location for their headquarters. This thesis investigates where international firms locate their headquarters using a unique dataset of 168 headquarters’ cross-border relocations to urban areas in Europe from anywhere in the world between 2009 and 2019. The theoretical background builds from not only economic geography but also international business literature to take advantage of the multi-disciplinary perspectives on the research topic. More specifically, this study enriches the understanding of which locational characteristics of agglomerations, urban environment, and country environment are central when international firms choose a location for their headquarters. Owing to these three geographical levels, this study offers an extensive and unique view of these location choices. Headquarters of international firms are prone to locate in urban areas that are close to other units of the same firm and have low taxes on especially corporate income but also on labor income, high- quality institutions and stable political environment, large airports, small population, many headquarters or other activities in the same industry sector and good availability of support services. Airports are particularly important for intermediary headquarters whose operations between the corporate center and subunits of their firm are crucially dependent on good airline connections. The importance of locational characteristics at all three geographical levels shows that a broader view across these levels contributes to a more comprehensive understanding of headquarters’ location choices. The results exhibit insightful differences to previous studies in terms of country conditions, wages, airports, and distance to other units of the same firm. While few other studies focus on country conditions embodying institutions and political stability, the increasing prevalence of technology- intensive operations is likely to make them more and more important for headquarters. Measuring headquarters-specific wages instead of the general wage level suggests that, contrary to what many previous studies conclude, wages are not a central consideration in headquarters’ location choices and their influence is positive when it exists. Wages thus manifest the high skills required from employees working in headquarters. Lastly, the focus on cross-border relocations of international firms’ headquarters in Europe highlights the importance of airports and minimized distance between the headquarters and other units of the same firm.
Thesis advisor
Saarimaa, Tuukka
Saittakari, Iiris
international firms, headquarters, location choice, nested logit model
Other note