Where Do Manufacturing Firms Locate Their Headquarters?
Firms’ headquarters [HQ] support their production activity, by gathering information and
outsourcing business services, as well as, managing, evaluating, and coordinating internal
firm activities. In search of locations for these functions, firms often separate the HQ
function physically from their production facilities and construct stand-alone HQs. By
locating its HQ in a large, service oriented metro area away from its production facilities,
a firm may be better able to out-source service functions in that local metro market and
also to gather information about market conditions for their products. However if the firm
locates the HQ away from its production activity, that increases the coordination costs in
managing plant activities. In this paper we empirically analyze the trade-off of these two
considerations.