What Drives Changes in HQ Architecture? A Longitudinal Analysis of Parenting Advantage in RHQ

Our study explores the changes in the HQ architecture in multinational companies’ (MNCs) organizational design. We analyze the reasons for the change in HQ charters with our unique data set of 1,474 subunits located in 43 countries and originally reporting to 375 regional headquarters (RHQs) located in Finland. We observe these units over a 12 year period and use parenting theory to explain vertical and horizontal changes in the HQ configurations. We propose that MNCs can shift the HQ charter either vertically in its organization hierarchy from RHQ to CHQ or horizontally from the current RHQ to another RHQ. Our findings suggest that a vertical parenting change is driven by high parenting opportunity due to significant market potential, e.g. in large Russian market. Both vertical and horizontal parenting changes are driven by limited parenting characteristics, illustrated by RHQ’s narrow regional scope. We contribute to parenting theory by building its empirical and theoretical foundations. By shedding light on the drivers behind vertical and horizontal changes in MNCs’ headquarter configurations we add a longitudinal dimension to our current understanding of HQ architectures.