Toward a Theory of Regional Organization: The Emerging Role of Sub-regional Headquarters and the Imapct on Subsidiaries

Abstract

This paper explores the organizational adjustment in host regions when MNCs switch from their original strategy to a regional strategy. MNCs set up sub-regional headquarters (e.g., Greater China sub-regional headquarters) under a regional headquarters (e.g., Asia regional headquarters). A sub-regional headquarters replaces a regional headquarters directly managing subsidiaries within the sub-region. The emergence of sub-regional headquarters is in response to the need for a balance between global integration and local responsiveness. An increasing number of decisions are made by sub-regional headquarters, instead of by subsidiaries, a parent, or regional headquarters. Industry characteristics and firm`s specific advantages (FSAs) affect the delegation of authority from a parent to regional and sub-regional headquarters.