Connecticut is home to nearly a thousand U.S. subsidiaries of foreign companies. Names like Lego, UBS, RBS, and Nestle. WNPR’s Sujata Srinivasan reports on how insourcing – the growth of these companies here in Connecticut – plays a role in the state’s economy.
U.S. subsidiaries of foreign corporations employ more than seven percent of the state’s workforce in the private sector. That employment is often called insourcing. Their Foreign Direct Investments – or FDI – contribute to the region’s economic growth in many ways. Peter Gioia, an economist at the Connecticut Business & Industry Association, explains why insourcing is important.
“It’s a case where both sides win. You get about 20 percent of exports in come from foreign direct investment companies. You have the majority of their purchases, over 80 percent of their purchases being of American companies – and that creates a lot more jobs, it creates a lot more tax revenues.”
Daniel Kennedy, an economist at the Connecticut Department of Labor, says Connecticut is a good fit for certain types of companies.
“You are not going to see auto assembly plants built in Connecticut because the cost of the land input is prohibitive. What you are going to see is R&D, high-valued products, capital-intensive processes.”
The U.S. subsidiary of French company Alstom is one such example. The Windsor facility is a brainiac hub of sorts. Its engineering team comes up with more than 200 new patent applications each year in electric power generation. The facility is expanding and hiring in its gas turbine business, says Nancy Mohn, director of marketing and strategy.
“With the recent discoveries of shale gas in the U.S., electric utilities are looking at natural gas as a clean, low-cost energy source for the future. For that reason, we’ve expanded our ability to design and commission those power plants right here from Windsor.”
Historically, foreign companies have been attracted to the United States not just for its large market, skilled workforce and advanced infrastructure – but for an innovation culture that helped create some of the most successful multinational corporations in the world. That’s especially true in the case of pharmaceutical companies, says Paul Pescatello, CEO of Connecticut United for Research Excellence, the state’s bioscience consortium.
“Every company in Connecticut has some ability to be almost any place in the world. But they choose to be here – and they choose to increase their presence here, because of that culture of innovation.”
Construction is underway at the U.S. subsidiary of the German pharma company Boehringer Ingelheim, the largest taxpayer in Ridgefield. The company is investing nearly $100 million in two new research and development facilities and has close to150 job openings here. Jim Baxter, vice president of development, agrees with Pescatello that an environment that supports innovation is a key factor.
“Boston and San Francisco are two areas having highly innovative cultures because of all the academic centers are there and you get industries built up around that. Connecticut I think also has that going for it.. It’s got a lot of very interesting industries – like ours I like to think – that attract people, therefore building even more innovation in the culture and the area.”
Trumpf, the third-largest taxpayer in Farmington, is also hiring more employees. Last year, revenue at the subsidiary of this German laser manufacturing and fabrication company, grew by 51 percent. It invested $7 million in R&D. Burke Doar, vice president of marketing, says despite the high cost structure in Connecticut, unit costs of production are getting lower because of advanced technology and process know-how. But other states are catching up, says Doar.
“There are many German and European companies that are contacting us, asking us where they should invest their manufacturing facilities here in the United States. I want to be able to tell them to come to Connecticut. But Connecticut has to do a very good job of convincing those customers that this is the right state to come to as opposed to a state like South Carolina, or New Mexico.”
Unwilling to lose out on those economic opportunities, the state’s Department of Economic and Community Development is making new efforts to attract foreign firms, says commissioner Catherine Smith.
“We’re also reaching well beyond some of these established companies now to look at emerging markets, for example, and to go into some of our existing large export areas to start to explore with companies more foreign direct investment here in the States.”
These companies say they have a local and a global outlook and work culture, which enables them to create cutting-edge products for the global marketplace – right here in Connecticut.
For WNPR, I’m Sujata Srinivasan.