The impact of distance on headquarters’ network management capabilities

The ability of an organisation’s headquarters (HQ) to bring value to and manage a globally dispersed multinational enterprise has been questioned in the existing literature. The purpose of this paper is to suggest that HQ-subsidiary distance is an important factor that affects such ability; this report also investigates the impact of distance on the HQ’s network management capabilities in the context of a global organisation’s evolution.

In this study, a single company was chosen to take part in a retrospective, longitudinal case study that highlighted two embedded product cases. The concept of distance was viewed as a variety of distance dimensions existing between the HQ and its subsidiaries.

The results indicated that distance impacted the effectiveness of the HQ’s network management capabilities by affecting HQ-subsidiary interaction and, consequently, shaping HQ’s knowledgeability about the subsidiaries’ operations. Moreover, the results suggested that the impact of such distance may shift from positive to negative over the course of a global organisation’s evolution.

Although this study was explorative, some generalisability to industrial-goods companies of Scandinavian origin that have transferred activities to their owned subsidiaries may be expected. Further replication of the study using multiple case companies across various industries and countries is desirable.

This work extends the understanding of technological distance, sheds light on the conditions necessary for the HQ of a globally networked organisation to engage in value creation in the context of its evolution and contributes to the overall appreciation of distance as a factor that comprises multiple dimensions.