Attracting Multinational Headquarters to Innovative Locations (Delta County Model)

Continue to work on the concept of allowing for greater intellectual draw to the U.S. along by finding a tax system that draws corporate headquarters (HQ) and its associated intellectual capital to the United States to better calibrate its tax system to the future of digital economics. You can read more about the overall piece of HQ and Infrastructure Invest (Which will be adjusted when new info arises) and the overall theory in which it will be placed Transactional Clusters. Its important explore modern and emerging tax structures to keep the nation competitive and moving into higher performing economic platforms. The problem of our growth and failure often is in the political realm and not in the ability to find new methods ( Why we should support R&D and allow science/evidence based to guide our decision making). 

There is a difference between a full functioning HQ and one that has been hallowed out to a shell. Unfortunately companies like to play legal games and keep their legal status in one place but have most of their functioning operations overseas. 

According to the study entitled Why Do Multinational Corporations Relocate Core Parts of Their Corporate Headquarters Abroad? companies analyzed 58 of 100 largest Dutch firms to find that the factors as to why a company hallows out their HQ is influenced by (1) an increase in the degree to which the HQ is internationalized; and (2) a decrease in the perceived attractiveness of the home country (Baaij, et. al 2015).

One of the reasons why companies keep a small HQ in their home country and but then gut it for other locations is because of strategy. Strategic considerations found in the study include the following:

(a) better quality communication and knowledge exchange with overseas strategic stakeholders (i.e. information spillover and diverse talent);

(b) access to higher quality international strategic resources, including capital, talent and services clusters (bettered mastered in a cluster where such environments can be created); and
(c) access to a lower-cost fiscal regime and a higher quality legal and regulatory regime (i.e. strong patent protection, legal structure, and law systems).


How that fits within my strategic cluster model includes 1. better clustered communications and knowledge exchange, 2.) focused capital, resources, talent spill over, and shared services, and 3.) lower costs and higher legal and regulatory environment. Putting the right resources within the right area raises value for firms in a way that moves beyond simple lower tax options.

The study seems to confirm the idea that headquarters can be attracted by a competitive HQ tax rate that also encourages greater access to the resources that create the highest value proposition. That also means we don't necessarily need to be the lowest taxable location but should provide tax flexibility (a calibrated option) as long as firms move/keep their HQ and percentage of operations (avoiding shell HQ) to the area (i.e. Delta County) in order to maximize industry related development. 

R2-1 HQ  can be attracted and retained through 1. better clustered communications and knowledge exchange, 2.) focused capital, resources, talent spill over, and shared services, and 3.) lower costs and higher legal and regulatory environment (Baaij, et. al 2015).

Here are a few things we might want to keep in mind. I'm trying to apply the ideas to a theoretical model for Delta County Michigan (See Start Up Firms Delta County) to see if it can attract diverse investments from the international community. Specifically focused on engineering/design firms that need access to advanced small batch beta and custom manufacturing. It is hoped that it will result in greater innovative growth in advanced technology (i.e. aerospace, military, outdoor, etc...) through new theoretical models (See Multi Clusters Delta County and Congressional 1st District News) and provide a framework for a national model (specially designed clusters to innovate key industries and in turn the national manufacturing chain). 

-A side note here. We are often limited by existing theoretical and philosophical works that led to current tax systems. Some politicians (I only say some) have more fun throwing food across the table then actually solving problems (Its their job to solve problems!). We have to break out of that mode in the next state of national development if we want to attract investment to the U.S.. What is written here isn't intended to disprove other tax systems but develop an option to consider further exploration. It might provide a middle route (top down and bottom up) where attracting HQ through a tax structure that maximizes intellectual capital draw (clustered industry innovation and tax rate) while at the same time maximizing tax revenue when innovative products butterfly supply chains throughout the country (mass production and bottom up skilled labor).

Baaij, M., Mom, T. Van den Bosch, F. and Volberda, H. (2015). Why Do Multinational Corporations Relocate Core Parts of Their Corporate Headquarters Abroad? Long Range Planning, 48 (1). Pages 46-58 https://www.sciencedirect.com/science/article/pii/S0024630112000477