Navigating Talent Hot Spots

Innovation and Economic Growth

Article Snapshot


William R. Kerr


Harvard Business Review, Vol. 96, No. 5, pp. 80-86, 2018


Cities like Boston and Beijing are talent “hot spots.” Firms need a presence in these hot spots but relocating to such areas is costly. Firms use three different strategies to establish ties to talent hot spots, while limiting cost and disruption.

Policy Relevance

Firms use several strategies to benefit from talent hot spots.

Main Points

  • Cities such as San Francisco, Boston, Tokyo, Paris, Beijing, Shenzhen, and Seoul are talent “hot spots,” and have an outsize economic influence.
  • Firms benefit from having a presence in these hot spots, although these locations are often expensive; firms use three strategies connect with a hot spot while limiting costs.
    • Some firms move their headquarters entirely to the hot spot.
    • Other firms set up innovation centers, labs, or corporate outposts in the hotspot.
    • Some firms organize executive retreats and visits to hot spots.
  • Relocation of headquarters is disruptive and risky, as it is hard to uproot an entire workforce, change locations familiar to customers, and form new local political ties.
    • Many firms have reduced the size of their corporate headquarters, limiting cost.
    • Dissemination of new ideas and skills from headquarters to outlying research and development (R&D) centers is improved by arranging for staff from R&D to visit headquarters regularly.
  • Drawbacks of relocation include negative press, which exposes a firm’s efforts to lobby for tax breaks or other advantages, and the “leaky bucket” problem (top talent can be persuaded to move to competitors located in the same hot spot).
  • Firms that opt to pursue the second strategy described above, siting R&D outposts in hot spots, include Walmart, which has set up R&D centers in Seattle and Silicon Valley.
    • The location of a firm’s hot spot real estate is significant; innovative firms cluster on certain streets.
    • Locals might see small R&D teams outside of headquarters as insignificant.
    • Collaborations between R&D teams in different nations are increasing in importance.
  • Firms that plan executive retreats in talent hot spots include Vodafone and ING (Netherlands); this strategy requires the firm to convince the executives to immerse themselves seriously in their experiences at the new location.


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