Location Trends of Large Company Headquarters during the 1990s.(statistical Data Included)

By Klier, Thomas; Testa, William | Economic Perspectives, Summer 2002 | Go to article overview

Location Trends of Large Company Headquarters during the 1990s.(statistical Data Included)


Klier, Thomas, Testa, William, Economic Perspectives


Metropolitan areas highly value the presence of company headquarters, and local governments tend to actively pursue and attract them. The keen competition among Chicago, Dallas-Ft. Worth, and Denver in April and May 2001 in the wake of Boeing's announcement that it would relocate its headquarters from Seattle highlighted the perceived benefits, including prestige, that the presence of a well-known company can confer on a metropolitan area. Of course, there are also tangible benefits. Headquarters employ a sizable and highly skilled white-collar work force and generate local demand for numerous specialized business services such as accounting and legal. In addition, headquarters often play a major role in corporate giving, as well as what are generally referred to as corporate citizen activities (Schwartz, 1997). It is not unusual to find that the landscape of a town has been defined by the presence of one or more corporate headquarters. For example, Columbus, Indiana, is dominated by public buildings designed by noted architects, courtesy of Cummins Engine and other local donors. Similarly, Eli Lilly, headquartered in Indianapolis, supports numerous local charities and public programs through the Lilly Endowment.

In this article, we provide information on recent locational trends for company headquarters, which will be helpful to policymakers as they design development efforts and expenditures. We document changes in the spatial distribution of corporate headquarters of large U.S. domiciled corporations during the most recent decade. In order to perform this analysis, we use a comprehensive set of data on publicly traded companies--specifically companies employing more than 2,500 people worldwide. We allocate headquarters to the 50 most populous metropolitan areas for 1990 and 2000 and examine the spatial changes that have taken place across 1) individual metro areas, 2) U.S. Census regions, and 3) the distribution of metro areas with respect to their population size. To identify and disentangle spatial changes, we further examine the sources and nature of headquarters growth across metropolitan areas using both simple data displays and multiple regression analysis. The regression analysis allows us to distinguish am ong competing factors in their influence on the location of headquarters.

Because policymakers are interested in attracting footloose headquarters, and perhaps nurturing small local companies as they grow to become large ones, we also document the extent and nature of headquarters turnover or "churn" for three sample cities--New York, Chicago, and San Francisco--between 1990 and 2000. We find a high degree of turnover and migration of headquarters, but an even higher degree of headquarters growth that has come about as small local companies have grown large. This result implies that policies to assist the growth of local indigenous firms of smaller size may be more beneficial than policies aimed at recruitment of footloose companies.

Policymakers and site selection professionals will also be interested in the evidence we provide as to where headquarters are now emerging. Several broad spatial shifts in headquarters location have been observed prior to the 1990s. One of the persistent characteristics of the U.S. economy has been the concentrated location of large company headquarters in a relatively small number of large metropolitan areas. That is not surprising if one considers the nature of headquarters operations. Headquarters employ highly skilled professionals and they demand ready access to high-level business services, such as legal, financial, and advertising--all of which tend to be found in large metropolitan areas. Furthermore, since headquarters facilities must control and administer an often far-flung organization, ready access to state-of-the art communications infrastructure, as well as personal transportation--that is, air transportation and connections--are a necessity in today's economy. …

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