THE FUNCTIONS OF THE HQ UNIT REVISITED: THE MULTIDIVISIONAL ENTERPRISE VS. THE BUSINESS GROUP

Abstract

This paper reexamines the evolution of the multibusiness enterprise with a focus on the changing
functions of the headquarter unit. Progressive transformations of the multidivisional firm and
its central organizational unit are examined to highlight the long-term evolution of corporate
headquarters. The paper compares two different types of multibusiness enterprises: business
groups and multidivisional firms, which have historically originated in different market and
institutional settings. Enterprises have tended to assign different roles to their headquarters
depending on the strategy they are pursuing and the structure they are adopting. External
environmental contexts however also had a critical impact on the functioning of corporate
headquarters. The roles of the headquarters of large enterprises (i.e. business groups with
widely diversified and unrelated product portfolios) operating in immature markets were thus
different from the ones (i.e. multidivisional firms) that have typically existed in developed
economic settings. The paper concludes with a call for future research on the subject of the headquarter unit of business groups and highlights the need for more fine-grained examination
of the operational dynamics of corporate headquarters in changing market and institutional
environments.