Hartford Business Journal

36 Doing Business in Connecticut | 2014 SPONSORED REPORT Fertile ground for private-sector investment, the Constitution State has the potential to be a top state for business Connecticut Rising By Bill DeRosa W e live and work in a state that, in many ways, is the envy of the rest of the country. Rich in history, culture, and natural beauty, Connecticut is known for its unri- valed quality of life, advantageous location between New York and Boston, acclaimed academic institutions, and world-class domestic and foreign-owned companies. The Innovation State Innovation has always been one of Con- necticut's hallmarks. The typewriter, insur- ance policies, vulcanized rubber, helicopters, submarines, color television, and the artificial heart — not to mention can openers, ham- burgers, and the Wiffle® Ball — are just a few of the state's contributions to the world. Today, that legacy continues through a vibrant network of small and large companies driving advances in Connecticut's key eco- nomic base industries: manufacturing, biosci- ence, aerospace, medical technology, financial services, insurance, healthcare, and others. Home to numerous businesses on the cutting edge of technology and innova- tion, Connecticut is ranked fourth in the country in industry R&D per capita at $1,856 — twice the national average. In addition, the state is eighth in patents per 100,000 workers, and seventh in venture capital deals per million residents (2014 Connecticut Economic Review). First in Well-Being Any discussion about Connecticut as a place for businesses to thrive invariably turns to the state's excellent quality of life. In most key quality-of-life categories, such as highest life expectancy, lowest pov- erty rate, lowest rate of property crime, and most residents with health insurance, Con- necticut ranks in the top ten states. In addi- tion, a recent study by the Social Sciences Research Council ranked the state number one for the well-being of its people. Maintaining a high quality of life for fu- ture generations, however, requires the kind of economic growth and job creation that only robust private-sector investment can bring. To encourage that investment, Connecticut, like many other states, must make progress in reducing business costs, cutting govern- ment red tape, shoring up state finances, and improving its transportation infrastructure. The good news is that considerable progress has already been made, and continu- ing to tackle barriers to economic growth and nurture the state's many strengths will put Connecticut on a path to becoming one of the best places to do business in the country. The Cluster Phenomenon For any company seeking to start, re- locate, or expand in Connecticut, a terrific quality of life is just the beginning of what the state has to offer. In 2010 (latest available data), Con- necticut was home to nearly 73,000 em- ployer firms of all sizes and almost 256,000 nonemployers. Seventeen corporations headquartered in Connecticut are Fortune 500 companies. "Connecticut's large and small busi- nesses in nearly all sectors are constantly creating mutually beneficial strategic part- nerships," says John Rathgeber, president and CEO of the Connecticut Business & Industry Association. "That kind of diver- sity and collaboration is essential for job creation and a strong economy." Jason Howey, president of Okay Industries, a New Britain-based manufacturer of metal components, mechanical assemblies, and surgical blades, says his company derives about 90% of its business from large corporations. "There are a lot of small manufacturers here, and a lot of their customers are the large OEMs," says Howey. "It's the cluster phenomenon, where you've got some big companies here in Connecticut and a lot of small, local guys supplying them." The state's smaller firms also benefit when the larger Connecticut companies they serve do business globally — and many of them do, says CBIA Economist Pete Gioia — which allows small companies access to markets they might not otherwise reach. The cluster phenomenon also helps larger firms. "Connecticut's big companies need their smaller neighbors for specific niche competencies," says Gioia. Good Things Happen in Small Packages Although many states have a var- ied mix of large and small companies, Connecticut's diverse economic base is uniquely advantageous because of the state's small footprint. "[Being nearby] shortens lead times and lowers transportation costs," says Howey. "Typically, most Connecticut [manufactur- ers] are doing very complex, high-end types of components and assemblies, so it helps the [big OEMs] to have an R&D partner that's a quick drive away. It's much better to be sitting across a table talking face-to face." Chris DiPentima, president of metal fabricator Pegasus Manufacturing in Mid- dletown, knows that his large Connecticut customers also appreciate his company's proximity to its own subcontractors. "They like the fact that our supply chain is very close to us, so that if there are issues, they can be remedied very quickly with a short drive." Global Connecticut Connecticut is a major hub for interna- tional business — both exporting and foreign direct investment (FDI). Its proximity to New York and Boston gives its companies easy ac- cess to overseas markets, making the state an ideal location for firms interested in exporting. According to the 2013 Connecticut Economic Review, Connecticut ranks 10th in per capita exports at $4,484 — 16% above the national average. In addition, U.S. De- partment of Commerce data for 2013 show that Connecticut is one of only 16 states to set new records for export sales in 2013. Connecticut's export shipments of mer- chandise last year totaled $16.5 billion. Top of the Food Chain One measure of Connecticut's appeal as a business destination is the state's numerous U.S. subsidiaries. In 2011, foreign-controlled compa- nies employed 102,600 Connecticut workers. What attracts foreign companies to Connecticut? To understand that, says Gioia, it helps to understand what kind of firms come here. "Our companies tend to be at the top of the food chain — the highest of the high end — when it comes to manufac- turing, financial services, and research and development," he says. "Such companies depend on innovation and productiv- ity gains, so they place a high value on a well-educated, productive workforce

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