The Decentering of the Global Firm

This paper describes recent changes in the relationship between firms and nation states. Firms are typically linked to the nation in which they began and are considered to have fixed national identities. While firms have reallocated various activities around the world in response to value creation opportunities, they have largely retained their national identities and their headquarter activities remained bundled in their home countries. This characterization is increasingly tenuous. Firms are redefining their homes by unbundling their headquarters functions and reallocating them opportunistically across nations. A firm’s legal home, its financial home and its homes for managerial talent no longer need to be colocated and, consequently, the idea of firms as national actors rooted in their home countries is rapidly becoming outdated. The implications for policy makers and researchers are outlined. This paper was prepared as a keynote speech for the CESifo Venice Summer Institute. I thank various seminar participants for helpful comments, Kathleen Luchs for excellent research assistance, and the Division of Research of Harvard Business School for generous financial support.