Global cities, ownership structures, and location choice

Abstract

Purpose This paper aims to develop a more nuanced view of subnational location choice with a particular focus on global cities. It is argued that multinational firms may use global cities to establish bridgeheads-subsidiaries at intermediate levels of the ownership chain that enable further international as well as subnational expansion. Design/methodology/approach Beyond those host country subsidiaries that are directly owned by a foreign multinational, the authors go deeper and focus specifically on the multi-tiered – “subsidiaries of subsidiaries” to examine how the geographic origins and destinations of these investments are associated with micro-location choices in a host country. Findings The authors find that there are substantial differences between the types, roles, activities and geographic origins of the firms locating in different areas, and in the ownership structures spanning them. The authors propose that this has managerial and theoretical implications which may be understood based on an organizing framework describing a tradeoff between the pursuit of global connectivity and local density on the one hand and cost control on the other. Research limitations/implications Empirical work on foreign location choices should take into account ownership structures and take a more fine-grained view of subnational variation. Practical implications Managers need to consider the trade-offs between connectivity, density and costs when making foreign location decisions. Social implications Policy makers should think about the unique contributions that various subnational regions such as global and ordinary cities can make to global value chains. Originality/Value The authors bridge the hitherto separate literatures pertaining to subsidiary mandates and subnational dimensions of foreign location choice by investigating the fine-grained roles and ownership structures from a supranational as well as subnational perspective.