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PERSPECTIVES ON CORPORATE HEADQUARTERS RELOCATION IN THE UNITED STATES 1

Milford B. Green University of Western Ontario

R. Keith Semple University of Saskatchewan

Diane}. F. Martz University of Saskatchewan

This paper investigates corporate headqua~ters relocation in the United States for the period 1957-1980. Corporate relocations are one explanatory element in the overall spatial process of headquarters evolution within post industrial urban systems. All major corporate relocations, mergers, bankruptcies, and new incorporations that effectively transfer corporate decision making to or from any metropolitan area are recorded for the five major sectors of the economy. A series of cartograms and bargraphs provide a summary of corporate headquarters relocations for the resource, manufacturing, and service, as well as utility and financial sectors of the economy. The cartographs indicate the magnitude and direction of all headquarters relocations as well as the location of major bankruptcies and new incorporations. The bargraphs indicate the relative gains and losses through move and merger activity for all members of the urban system. The findings indicate that, in contrast to other Western economies, the dominant national center, New York, is in absolute decline as a home for corporate headquarters. This decline and decentralization is seen as a response to the general maturation of the American urban system and emergence of an entire system of urban centers rapidly acquiring large corporate headquarters status. The decentralization process is evident in all sectors of the economy except finance.

The growing importance of the control, command, or decision-making function of corporate headquarters in modern economies has led to a parallel increase in the interest in the urban geography of such quaternary place activities. It is generally accepted that the modern corporation wields tremendous influence over the economic, social, and political institutions of society. Corporate influence is, in part, spatially concentrated in the corporate headquarters location. These headquarters are located invariably in major metropolitan centers. The importance of an urban center is, in part, due to the economic power it wields. The extent of such power is partially a function of the number and size of corporate headquarters located there. Consequently, one way to study the evolution of economic power in the American urban system is to undertake an analysis of corporate headquarters relocations. Toward this end, the paper examines all major corporate headquarters relocations, bankruptcies, new incorporations, and merg\rs in which effective corporate control is transferred from one center in the urban system to another dtning the period 19571980 for each of five major sectors of the economy. A series of sector flow cartograms and bargraphs for resource, manufacturing, service, utility, and financial corporations provides a detailed comparison of interurban corporate headquarters moves over the past quarter century for the American urban system.

370 Urban Geography, 1985, 6, 4, PP. 370-391.

Copyright© 1985 by V. H. Winston & Sons, Inc. All rights reserved.

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BACKGROUND In the early stages of national development, corporate headquarters locate in local and regional centers of business activity. Later, as the economy expands and businesses grow in size and influence, forces emerge which encourage management to transfer corporate decision-making activities from smaller local and regional centers to a few larger nationally oriented metropolitan cities. This process continues until headquarters of the largest corporations concentrate in one large dominant international urban agglomeration within an established core ~egion of the nation. Still later, forces begin to appear which tend to counteract this historical trend of increasing spatial concentraiton of control. These forces encourage corporations to disperse to wellestablished smaller but dominant regional centers outside the original core and to one or more lower-order centers within the core region. As the country matures, further dispersion occurs throughout urban centers of the peripheral regions and of the core regions until many centers in a variety of regions are important. The idealized endpoint of no regional or national center dominance (Semple and Phipps, 1982) 2 theoretically exists (Fig. 1 ). Over the past 25 years, corporate headquarters have been moving away from established urban centers such as New York to smaller regional and subregional cities (Armstrong, 1972, 1979). Urban geographers interested in urban systems in advanced countries have examined in some detail the general process of economic and demographic decentralization that is especially apparent in the United States (Bourne, 1975; Pred, 1977; Johnston, 1982). Corporate headquarters locations within the American urban system are consistent with this general deconcentration process. Semple and Phipps (1982) provided an ideal-hypothetical model against which corporate headquarters location trends in the United States have been compared. This model concurs with the findings of Alonsc (1980) and verifies the findings of Semple (1973) that corporate decision making is becoming more dispersed. The United States and the spatial concentration of its corporate headquarters are probably entering the Era of Regional Maturity in which no one urban center truly dominates the economy. This decentralized structure is also evident in Germany where only 1 ~/o of the largest firms are located in Hamburg, the city with the largest concentration (Strickland and Aiken, 1984). In sharp contrast is the highly centralized structure found in Canada (Semple, 1977; Semple and Smith, 1981), Great Britain (Westaway, 1974; Parsons, 1972; Evans, 1973), Australia (Stewart, 1977), Japan (Abe, 1984), New Zealand (LeHeron, 1977), and France (Strickland and Aiken, 1984). This is not to deny, however, that corporate power still emanates from headquarters locations which link executives to a vast urban spatial informatioll_ network and that this network is still highly linked to centers such as New York (Gre~ and Semple, 1981; Green, 1983). CORPORATE RELOCATIONS The relocations of corporate headquarters may be characterized as either "m igratory" or "stationary." Migratory relocation occurs with the physical migration of the head-office staff from one city to another, or from a central city location to one in the suburbs. Stationary relocations occur when no true staff migrations necessarily take place. Events such as mergers, bankruptices, and incorporation of new businesses,

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however, produce concentrations and dispersion effects similar to migratory relocations. Other business activities, such as the public incorporation of a private company, the formation of a governmentally controlled corporation, or a shift in the classification of a corporation's principal function, may also appear as statistical relocations when no migration takes place. Such relocations imply only a shift of control functions and headquarters staff and not necessarily that of productive capacity. The statistical gain or loss of a corporate headquarters office can occur in a variety of ways. One of the most significant migratory relocations is the 1980 move of the American Electric Power Company from New York to Columbus, Ohio. This represents the move of one of the largest utility corporations in the United States and the transfer of the decision making power of a corporation that was valued at almost $11 billion. This represents a significant gain for Columbus, a subregional center, and a corresponding loss for the once dominant New York. The 1974 bankruptcy of Frank· lin Bank, a $5 billion corporation, is a large stationary relocation and a significant loss to New York as is the bankruptcy of the merchandiser, W. T. Grant Co., with a loss to New York of almost $2 billion in sales. On the other hand, the formation of Moore McCormack Resources in 1978 appears as a stationary relocation and 1980 gain for Stamford of $641 million in resource sales. Mergers represent an important "stationary" relocation process that permits the transfer of corporate power from one urban center to another. The 1976 National Airlines merger with Pan-American World Airways of New York saw the transfer of con· trol of $636 million in airline revenues from Miami. Armour Foods and Greyhound, both of Chicago, merged in 1969 and moved their corporate head office to Phoenix. Today, the southwestern conglomerate controls revenues of almost $5 billion. In 1972, New York-based Kraft moved to Chicago. In 1980, Los Angeles-based Dart lnds. also moved to Chicago, merged with Kraft, and formed the Dart-Kraftco Corp., a company that controls almost $10 billion in sales. A more complicated chain of events began in 1966 when the New York Central Railway merged with the Pennsylvania Railway of Philadelphia to form the Penn Central Transportation Co. The loss to New York was control of nearly $1 billion in transportation revenues. Abruptly in 1975, the $2 billion Penn Central went bankrupt, with a great loss to Philadelphia. In 1980, a new company, Penn Central Resources of New York, with over $2 billion in resource sales, incorporated. Some mergers create a circular pattern of relocations. In 1965, Richfield Oil of Los Angeles merged with the Atlantic Oil Co. to form AtlanticRichfield of Philadelphia. In 1968, Sinclair Oil of New York was purchased by At· !antic-Richfield and the new headquarters was located in New York. Finally, in 1972, Arco moved back to Los Angeles. It controlled almost $25 billion in oil revenues in 1980. A new form of merger activity results when control is transferred out of the country. Libby, McNeil and Libby, a Chicag

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Manufacturing Sector Figures 4 and 5 demonstrate the enormous net losses of over $58 billion in corporate revenues incurred by the New York area. Kraft moved to Chicago; General Host, Singer, and Champion International to Stamford; Coca Cola to Atlanta; United States Steel to Pittsburgh; American Can and Chesebrough-Pond's Inc. to Greenwich; General Dynamics to St. Louis; General Electric to Fairfield and Uniroyal to Middletown. Some large companies offset the outflow by moving to New York or merging with a New York-based corporation. Gulf and Western Industries moved from Houston and SCM from Syracuse. Glidden of Cleveland merged with SCM, now of New York. Reliance Electric of Cleveland merged with Exxon of New York, while Park Davis of Detroit and American Optical of Boston merged with New York-based Warner Lambert. Stamford and a host of other New England centers gained at New York's expense as did other regional centers such as Pittsburgh, Dallas, Atlanta, and St. Louis.

Service Sector Figures 6 and 7 indicate that the largest net losses in merchandising, transportation, construction, and communications occurred for New York and Wilmington, while the largest net gains occurred for Salt Lake City, Dallas, Miami, and San Diego. American Stores moved from Wilmington to Salt Lake. W. T. Grant of New York went bankrupt. American Airlines moved to Dallas from New York as did Eastern Airlines to Miami and Southern Pacific Railway to San Francisco. The Chessie System moved from Baltimore to Richmond. One of the largest moves to New York was made by Union Pacific of Omaha.

Utility Sector Figure 8 illustrates, once again, the process of dominant city losses and regional center gains. New York lost control of over $45 billion in utility co~poration assets to a host of regional centers such as Stamford, Columbus, Houston, and New Orleans. This sector witnesses few but dramatic corporate moves. New York lost General Telephone to Stamford, American Electric Power to Columbus, Middle South Utilities to New Orleans, American Natural Resources to Detroit, Consolidated Gas to Pittsburgh, and Panhandle Eastern Pipe to Houston. Houston also gained Texas Eastern Corp. from Shreveport and El Paso Natural Gas from El Paso. Regional center gains in corporate power and decision making were everywhere evident.

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Figure 9 indicates that Los Angeles and New York are moderate net losers in the relocation of banks, life insurance, and diversified financial corporations, while San Francisco is the largest net gainer. Most of New York's losses result from the $5 billion bankruptcy of Franklin Bank and the move of General ReCorp. of California to San Francisco. Overall, the financial sector is stable. No banks nor life insurance companies relocated their corporate headquarters. Most of the activity occurred in the diversified

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financial field. The net result, however, was to weaken New York and Los Angeles and to strengthen San Francisco, Greenwich, and Buffalo. CONCLUSIONS This paper examines the general premise, that with respect to corporate headquarters, the United States, in contrast to other Western economies, is in the era of the Drive to Regional Maturity, i.e., the dominant national center is in decline. This decline and decentralization of headquarters is seen as a response to the general maturation of the American urban system. The decentralization of headquarters reinforces this maturation process, thereby increasing the likelihood of even more decentralization. Prior to the 1960s, New York was, without question, the corporate primate city of the United States (Quante, 1976). By 1980, New York was still the most powerful center, but its power base has been eroded in every sector of the economy-with the single exception of finance. Corporate relocations, mergers, bankruptcies, and new incorporations are reinforcing this fact. Today, the general trend in corporate headquarters locations is away from a dominant national, and even some major regional centers such as Chicago, to a more mature system of urban centers dispersed throughout the entire country. In particular, relocations of corporations have reinforced this trend. NOTES 1

The authors acknowledge the efforts of Keith Bigelow and the Cartographic Laboratory, Department of Geography, University of Saskatchewan. 2 See Figure 1, Semple and Phipps ( 1982) for an explanation of spatial evolution of a national urban system. Countries that could be considered to be in the stage of the Era of Dominant Regional Centers are Canada, Great Britain, New Zealand, and the United States, before 1956. After 1956, the United States has been in the stage of the Drive to Regional Maturity, while Germany is in the stage of National Maturity. 3 Corporate relocation magnitudes are considered as the 1980 value of revenues or assets gains or losses, no matter when in the period the actual move took place. Perceived moves, like mergers or bankruptcies, have values recorded at the time of merger or death.

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