Amazon HQ2 splits in two — for good reason

Amazon is reportedly close to choosing dual locations for its second headquarters: Island City in Queens, N.Y. and Crystal City, a neighborhood in Arlington, Va., just outside Washington, D.C.  

The choice for HQ2, as it is known, surprised many who have been awaiting the company’s decision but, in retrospect, it shouldn’t have. Splitting the headquarters in this way offers many advantages with few disadvantages and will prove to be a smart move.

{mosads}Aside from enabling Amazon to serve the East Coast more efficiently, the company’s decision means it will now be within the European time zone. Coupled with its existing Seattle headquarters, which puts Amazon within the Asian time zone, it will now always have fully functioning offices open 24 hours a day that can to serve the entire world. 

Furthermore, if the headquarters had been concentrated in one city, it would have inevitably driven up home prices in that area and strained the city’s transportation and infrastructure.

This, in turn, would have burdened and no doubt alienated the people living in that area, as well as strained the Amazon employees who will be looking for housing and commuting to work each day.   

Amazon’s decision also greatly broadens the talent pool of both white- and blue-collar workers the company has to choose from, meaning having to make fewer compromises when hiring.

Similarly, dual East Coast locations expand the company’s options when it comes to partner companies, thus increasing the quality of the marketing and public relations firms, call centers, etc. that Amazon will ultimately work with.  

The increased competition will most likely also mean Amazon will be able to negotiate more favorable terms with their partner companies.

As for the specific locations chosen, New York and Washington, D.C. make a lot of sense,. If Amazon is to grow the way Jeff Bezos envisions, it will need access to capital markets, so a presence in the financial capital of the world will be key.  

As this infusion of capital enables Amazon’s growth, the company will increasingly be seen as monopolistic. As this happens, it will face greater scrutiny by the federal government and increased regulation.  

Thus, a headquarters in Washington, D.C. with its proximity to political power and the most influential lobbying firms in the country, will prove essential if Bezos is to realize his ambitions for the company.  

This is not to say that the decision does not have certain drawbacks, First, although New York and Washington, D.C. give access to the financial and political centers of the country (if not the world), they are not the center of technological innovation on the East Coast — with its proximity to MIT, Harvard and a host of other top-tier universities, Boston/Cambridge holds that distinction.   

However, Amazon appears to have anticipated this problem and headed it off preemptively. It announced plans back in April to construct a new building in Boston’s Seaport area to house 2,000 employees, with an option to lease a second building across the street should it prove needed.  

This presence should be sufficient to ensure the company can draw on the Boston area’s talent.  

Another potential downside to having two headquarters in relatively close proximity, is the inevitable cost and employee redundancies. Some of these no doubt will be addressed over time, but it is unlikely they will ever be eliminated completely.

With all the advantages the dual locations bring, however, these drawbacks are relatively minor.

Charles Kane is a senior lecturer at MIT Sloan Business School. Amanda Kempa-Kane is a visiting fellow at the Harvard Kennedy School.