Why so many corporate headquarters leave California for Texas?

Question

When companies move their headquarters out of California, they choose Texas way more than they choose any other state. Since Jan. 1, 2018, some 107 companies have moved their headquarters to Texas from the Golden State, according to Vranich, president of McKinney-based site-selection consulting firm Spectrum Location Services. The next winningest destination in that time period was Tennessee with 22 relocations from California. Put another way, Texas lured five times more California headquarters than its next closest competitor.

Within Texas, Austin and Dallas-Fort Worth are dominating. Why are so many California companies choosing Austin and DFW when they move to Texas?

Austin has successfully portrayed itself as Silicon Hills. So if you're into the whole Silicon Valley ecosystem, as they like to call it, and you want to have that familiarity about you, you go to Austin. If you want to find software writers and people who know how to promote a digitally oriented company, you go to Austin.

https://www.bizjournals.com/au...

Joe Splitrock · Answer

US News and World Report is not a good source in my experience. The "Best States" rankings are subjective because it all depends on selected criteria and weighting. California has the most patents originated, but Texas has the second most in total number. US News just chose to weight the number based on population, so it pushed TX down the rankings, even though they produce more patents that MA. When you weight on population states with a larger group of working class people will have lower per capita patents. Does a company even care how many patents per capita were written in a state? Venture capital money will flow to any state if the business idea is worth it.

Doing a quick Google search looking only at top page results, I found multiple rankings that place Texas much higher than California:

CNBC ranking Texas is 2, California is 32

https://www.cnbc.com/2019/07/1...

Forbes ranking Texas is 2, California is 31

https://www.forbes.com/best-st...

Chief Executive Texas is 1, California is 50

https://chiefexecutive.net/up-...

Bipartisan Tax Foundation state business tax ratings Texas is 11 and California is 49

https://taxfoundation.org/2021...

No doubt California has a strong legacy of innovation and the existing talent base will make the state a powerhouse for years to come. That being said, every major company in the state is diversifying outside California. High cost of living, high taxes and regulation are just not sustainable for a business. Austin has had technology and innovation growth for 40 years, so it is appealing for many reasons.

Ryan Kelly · Answer

@Neil Narayan I can hear California singing that George Strait classic song "All my Exes Live in Texas...."

Aaron Gordy · Answer

All are very good points but the truth is the bbq and the beer. : )

Chris Schorre · Answer

Well this has turned into a full fledged CA vs TX pissing match. CA and TX are both great states with different attributes. No need to keep a scorecard.

Jon Schwartz · Answer

Good grief, you people...

US News and World Report ranks California #2 in the county, only behind Massachusetts, for business environment:

https://www.usnews.com/news/be...

Why? Because CA enjoys more venture capital per capita and more patent creation per capita than any other state besides MA.

TX isn't even in the top 10!

It's great and all that TX has lower income taxes (though certainly not lower property taxes -- which should matter on this forum!), but CA is still a better place to go into business, no question.

Matthew Crivelli · Answer

California is not a business friendly state what so ever. The exodus will continue until California law makers come to their senses. They not only deter large business but small ones as well. Why pay the taxes and deal with all the crazy regulations when you can cross over to another state? I think the reason companies like Texas is similar to why they like California, it is one of the largest states in the country.

Jordan Moorhead · Answer

You can find evidence to support any point!

Wale Lawal · Answer

Guys,

There are opportunities everywhere only if we take our time to study the market.

California is great and Texas is great as well but they have their uniqueness. Generally, it is all about your preferences and goals.

Some people can not just afford the cost of a house or investment property in California, hence Houston, Texas and San Antonio, Texas become an option for them.

Goodluck to everyone taking action.

Bryan Hancock · Answer

It's entertaining to me that people compare things at the state level.  Austin is FAR different than the DFW and the Houston metroplex is also FAR different than either of these.  An employer locates to a MSA and not specifically to a state.  Yes, the tax situation matters, but so does the talent pool for scarce resources.  With COVID and all of the new infrastructure investments that companies were required to make it is going to make the world a much smaller place.  The talent that resides in California can easily work on projects in Texas and vice versa.  The talent globally can also compete for various parts of the work.

You're going to continue to see a giant sucking sound out of California given their policies and anti-business climate.  Elon Musk is setting up shop heavily here and Amazon is making big bets here too.  The intelligent money is voting and California is not winning.

The Austin area still has a long way to go with venture capital formation, but the capital will be attracted here too given that Austin is beating out Silicon Valley in many of the key measurements for best startup climates.  The days of forcing talent to move to California to secure capital are gone and with capital formation largely happening and being facilitated online you can expect for this to continue to accelerate.

Eric Bilderback · Answer

The Soy is coming to Texas yeehaw!  Along with the soy will be; Greater division between rich and poor, social tension etc.  If I were a Texan I would be careful what I ask for.  Oregon a much smaller state has changed dramatically and I think most old timer Oregonians would say not for the better.

Although many Oregonians got rich and continue to make lots of money from Californians coming in.

Why so many corporate headquarters leave California for Texas?

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