An empty shell? Relocation of central and eastern European startups, virtual headquarters and beyond

Abstract

Some of the best technology startups born in CEE moved their headquarters to a foreign jurisdiction before scaling. These ventures became ‘foreign’ companies but kept the principal business functions in the countries of origin. We theorize about this phenomenon, referred to as virtual relocation, and consider what it conveys for the asserted reduced relevance of location-bound advantages and constraints in the digital era. We take a process approach and investigate the cases of 34 technology startups from Poland, Hungary, and Romania. We find that CEE startups’ choice of a ‘virtual’ type of relocation can be traced back to the tension between the retention factors and the push/pull factors influencing their locational decision. We show that the factors that push CEE startups away from their home countries, pull them to the destination country, and make them retain specific business functions in their home countries are equally location bound. If virtually relocated startups manage to seize the assumed opportunities in the destination country and scale, the virtualness of the HQ office will gradually fade: employment starts growing also at the HQ location.