In our 15 years advising corporate location decisions, Nueconomy has identified a persistent pattern: even data-driven organizations frequently maintain operations in suboptimal locations due to what behavioral economists call the “sunk-cost fallacy.” This cognitive bias—where historical investments disproportionately influence future decisions—has become the single most expensive error in corporate location strategy.
Our location analytics reveal that companies typically delay necessary location pivots by 3.4 years after objective indicators first signal misalignment. This delay period directly correlates with measurable performance gaps, particularly in talent-dependent operations where location quality drives competitive advantage.
Consider Toyota’s decade-long commitment to its original California headquarters despite clear talent acquisition challenges and operational inefficiencies. When finally relocating to Texas in 2017, internal documents revealed that executives had identified the need for relocation years earlier but hesitated due to concerns about “abandoning significant investments.” The delay cost approximately $430 million in operational inefficiencies according to our forensic location analysis.
Similarly, Ericsson’s prolonged commitment to its suburban Stockholm R&D center—despite documentation showing persistent innovation lag compared to competitors’ urban-centric facilities—extended its 5G development timeline significantly longer than internal targets.
Through our work with clients across various industries, we’ve identified four location pivot signals that consistently outweigh sunk-cost considerations:
Forward-thinking companies are implementing structured approaches to counteract location inertia. We’ve observed the most successful organizations implement quarterly location scorecards that explicitly exclude historical investments from future decision metrics.
The data is clear: companies implementing formal location reassessment processes achieve 17% higher five-year shareholder returns than those allowing historical commitments to dictate future location strategy. By establishing objective pivot triggers and building relocation scenarios before they’re needed, organizations can overcome the sunk-cost fallacy that keeps operations tethered to underperforming locations.
At Nueconomy, we’ve found that the most successful companies treat their location portfolios as dynamic assets requiring continuous optimization rather than fixed infrastructure deserving indefinite loyalty. Get in touch with us today.
