Imitation of location choices for rare foreign ventures: Tax‐motivated relocations of headquarters

Abstract Research Summary Peer firms tend to imitate each other's location choices for foreign subsidiaries. We examine whether they also engage in location choice imitation when undertaking rare, high‐stakes foreign ventures in the form of tax‐motivated relocations of headquarters. Although location choices for such relocations will likely be made meticulously, we propose that these choices are nevertheless subject to imitation among compatriots, and particularly among domestic rivals. Applying organizational institutionalism, we argue that by imitating these peers, relocating firms reduce the uncertainty they perceive and partly legitimize their relocation. We also predict moderating effects of relocating firms' presence in a location and of their subnational home region's cultural tightness. We find support for these ideas studying the location choices announced by US relocating firms between 1996 and 2017. Our study extends global strategy research on location choice imitation to the corporate level, revealing that such imitation even occurs among firms undergoing international transformations. Managerial Summary Similar companies, or “peers,” often follow each other to the same location when setting up operations abroad. We examine whether peers also imitate each other's location choices when relocating their headquarters abroad for tax reasons. While firms making this rare and bold move will likely choose a destination carefully, we argue that they nevertheless tend to imitate their compatriots' and especially their domestic rivals' location choices, so as to reduce the uncertainty they experience about countries' attractiveness and justify their relocation domestically. We also propose that a firm's tendency to imitate peers' most popular location choices depends on the firm's knowledge of foreign locations and the strength of social norms in its subnational home region. We find support for these ideas in a study of US firms that announced relocations between 1996 and 2017. Firms thus even engage in location choice imitation when undergoing international transformations.