The Benefits of Hierarchy? – Exploring the Effects of Regional Headquarters in Multinational Corporations

Phillip C. Nell; Björn Ambos; Bodo B. Schlegelmilch

doi:10.1108/S1571-5027(2011)0000024011

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Advances in International Management

ISSN: 1571-5027
Series editor(s): Timothy Devinney, Torben Pedersen and Laszlo Tihanyi

Subject Area: International Business

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The Benefits of Hierarchy? – Exploring the Effects of Regional Headquarters in Multinational Corporations

Document Information:
Title:	The Benefits of Hierarchy? – Exploring the Effects of Regional Headquarters in Multinational Corporations
Author(s):	Phillip C. Nell, Björn Ambos, Bodo B. Schlegelmilch
Volume:	24 Editor(s): Christian Geisler Asmussen, Torben Pedersen, Timothy M. Devinney, Laszlo Tihanyi ISBN: 978-0-85724-991-3 eISBN: 978-0-85724-992-0
Citation:	Phillip C. Nell, Björn Ambos, Bodo B. Schlegelmilch (2011), The Benefits of Hierarchy? – Exploring the Effects of Regional Headquarters in Multinational Corporations, in Christian Geisler Asmussen, Torben Pedersen, Timothy M. Devinney, Laszlo Tihanyi (ed.) Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness? (Advances in International Management, Volume 24), Emerald Group Publishing Limited, pp.85-106
DOI:	10.1108/S1571-5027(2011)0000024011 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	This chapter investigates the role Regional Headquarters (RHQs) play in large multinationals and probes to what degree the establishment of RHQs provides hierarchy benefits according to the M-form principles. Nine large multinational corporations (MNCs) provided the empirical setting for 55 in-depth interviews with decision-makers at corporate, regional and local levels. Case reports were developed for each MNC and the industries they operated in. Observations, company documents, detailed workshops with managers and a follow-up survey within one of the MNCs complemented the data. We find evidence for benefits of hierarchy when RHQs are introduced very much along the lines of the classic M-form organisation with product divisions. However, M-form principles are taken ad absurdum by the fact that there seems to be constant reorganisation regarding the mandates and the geographic scope of the regions. The practical implications of the chapter show that MNCs need to be aware that RHQs and the regional divisions they manage seem to be more difficult to manage in a stable way than product divisions. A clear rationale needs to underlie regional groupings to minimise instability, dissatisfaction among subsidiaries and, hence, ruptures of the M-form principles. Further research is needed to compare the stability of product versus regional divisionalisation. Future research on organisational structures should focus on firm-specific definitions of regional scope.