For Ease of HQ Control? A Study of the Motives for Location Choice of HR Shared Services in MNEs*

Shared service centers (SSCs) have become an important mechanism for multinational enterprises (MNEs) to deliver HRM services to their dispersed operations. Location choice may be critical to understanding the motives behind utilizing HR SSCs in MNEs, but few studies have explored this issue. We examine the factors and underlying motives - particularly, HQ control motive - for selecting a location for an SSC, drawing on a case study of six large MNEs from North America, Europe and Asia. Our study reveals that cost efficiency and service quality are the major motives for the firms to set up HR SSCs. However, the concern of headquarters for control over SSCs is also an important motive in relation to location choices based on the behavioral view. We also identify specific factors for SSC location decisions, associated with the HQ control motive, namely: home- country language similarity, geographical proximity to the home country and time zone. Our findings offer a novel insight into the nature of an SSC by highlighting the significance of control issues in managing SSCs within an MNE.