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California makes the news for the unprecedented number of natives and its relatively high taxation rates. Yet California is still one of the best states for business according to reports. Let’s look at the reality of business in California compared to the myths and the hype. We’ll also analyze the reasons why California remains a major source of business creation.
Silicon Valley remains a center of technological innovation. Yes, high real estate prices due to limits on density are driving businesses to Seattle and inland, but it is also driving the rebirth of poorer cities around San Francisco Bay because the proximity to companies, suppliers, and supporting services in Silicon Valley is so important. The trend can also be seen in international finance, where cities like Amsterdam, that were a financial hub 200 years ago, still beat many new cities on incorporations and venture capital.
We can talk about how California’s drinking water infrastructure just hasn’t kept up with population growth, hence the constant water rationing and water wars between farmers and city dwellers. However, while California has not built major new water infrastructure since the 1960s due to environmentalist pressure, it has gone full speed ahead with every other type of infrastructure.
The Port of Los Angeles, for example, is one of the busiest ports in the world and has been modernized in recent years, and it is only one of the two “mega-ports” in the state. Long Beach and Oakland are the other two “mega” ports, but there are eight smaller public ports in the state. San Diego and San Francisco both have international airports. California’s ports and airports are the major Western interface for trade with the rest of the world for Americans, with around a trillion dollars of product flowing through them each year. And because of this infrastructure, manufacturers locate themselves here – which is why California alone accounted for 11% of U.S. total exports during 2016 according to the U.S. Department of Commerce.
California beat all other states in new business creation in 2016. It had the largest increase in the number of new companies forming. Between 2014 and 2017, the state added more than fifty thousand new businesses of all sizes. In contrast, the “company count” for the U.S. as a total fell 2.5%. California’s growth in the number of small businesses was second only to Florida, a state that saw serious growth because of its lower income taxes and business taxes. For mid-sized businesses with 10 to 999 million in sales, California actually beat out Texas.
Exporters and new tech firms were part of this category but not the only ones. For new big business creation, companies with sales of more than a billion dollars, California was second in the nation, only beaten by New York. This creates huge demands for graduates with an executive leadership masters. As a matter of fact, more and more corporation are privileging MBAs who also have a masters in executive leadership.
When it comes to small businesses, California was tenth best for creation rates while states at the bottom end of the scale like Pennsylvania went negative. It’s massive tech hubs drive new product development, its laws encourage new products and services to be created, and its world class infrastructure leads many businesses to base manufacturing here so they can ship their products all over the world.
