This study intends to fill these gaps by investigating the extent to which a host country's connections to its former colonies acts as a location factor for foreign investments in headquarter activities of MNCs. This is particularly true for European countries whose governments intensively subsidize investments in high value-added activities by multinational corporations (MNCs), as a means of retaining their location advantages for those activities. Given the sensitivity of these activities for the company, and the importance of receiving and maintaining such FDI establishments for the host countries, it is imperative and relevant that we improve our understanding of the factors that drive FDI location choices for such activities (fDi Intelligence, 2020). This is particularly true for FDI used to establish affiliates that provide headquarter (HQ) activities to the other businesses of the foreign investors (intermediate or regional headquarters Pla-Barber et al., 2021). However, the role that these connections with former colonies play in making a host country more attractive as an FDI recipient from foreign firms has received little attention in international business (IB) studies. It is not a coincidence that these special connections and the ease of doing business in the former colonies accord privileges to some European countries in influencing the attraction of FDI. As a result, associations persist in the form of special economic connections (UNCTAD, 2016), concessions for ease of business practice (Jones & Khanna, 2006), or strong FDI links (Haberly & Wojcik, 2015) between Europe and its former colony countries. Many European countries were deeply involved in colonialism in the past, with some exerting and wielding tremendous economic and political influence over the years as colonial centers. We emphasize how the former colonial influence continues to confer advantages upon some countries, including the attraction of FDI. We contribute to the literature by advancing the understanding of foreign headquarter location choices, and by demonstrating the importance of historical context in international business research. The study findings support the hypothesis that past colonial relationships and historical context influence FDI decisions and location preferences. We refer to this combined characteristic as colonial-based connectivity. Drawing on a sample of 2230 foreign headquarter investments in Europe, we find that the stronger the combined effect of historical connections and current economic relationships with former colonies, the higher the probability of attracting headquarter investment projects. The strategic role of foreign headquarters as coordinators, opportunity detectors, and global bridgeheads makes the location choice of headquarter activities sensitive to historical-based institutional connections. In this study, we argue that European countries’ extensive relationships with former colonies represent a location factor that attracts foreign headquarter investments.
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