FACTORS AFFECTING THE CHOICE OF LOCATION OF THE HEADQUARTERS OF ESTONIAN TECHNOLOGY COMPANIES

Client: Startup Estonia

Period: 2021

In the study, we map the factors influencing the choice of the country of location of the headquarters of Estonian technology companies and indicate what changes the founders expect would be needed to keep headquarters in Estonia.

Most companies never change their country of location and therefore their location depends on where the company was established. A company is usually established at the residence of the founders and in that case, the location of the company will not be considered in length at the time of establishment. The location is considered more when the company is established abroad but even then, the founder often has a personal connection to the country of location. When establishing a company abroad, the same factors were indicated in the choice of location as when moving the registered headquarters of the parent company from Estonia to a foreign country:

  • Size of capital market
  • Evaluation of company worth
  • The size and proximity of sales market
  • Concentration of the industry branch and the possibility of hiring specific talent or, more broadly, business talent

In addition, the country’s reputation for supporting fintech business was cited as the reason for choosing the country of location. The move to foreign incubators and the subsequent request of the investor to change jurisdiction were also cited as reasons for changing the registered location. The following were mentioned by companies located in Estonia as reasons for the possible relocation of the headquarters abroad:

  • Access to bigger capital market
  • Possible exit in a bigger stock exchange than Tallinn stock exchange
  • Licenses for licensed activity (e.g., fintech)
  • Limited amount of necessary workforce for business in Estonia

The study was commissioned by Startup Estonia and funded in the frame of Startup Estonia program (EU50651) by European Regional Development Fund. The Startup Estonia program is implemented by KredEx.