Growing up in California, I was familiar with companies like McDonnell Douglas, Chevron Oil, Kaiser, and Lockheed, among others. The economy and consumer buying habits have changed constantly, but California remains an economic powerhouse. People come to California seeking inspiration and are compelled to innovate if they want to stay here.

I began my career in the defense industry, specifically in ship repair. I joined at the end of the era when large ship repair facilities still dotted the California coastline, such as Todd Shipyard, NASSCO–San Diego, and Southwest Marine. I have witnessed firsthand how the defense industry has shrunk to a relatively small player in California’s economy. In recent years, the hospitality and tourism industries have experienced significant growth. Then came the COVID shutdown, which again forced California entrepreneurs to innovate. Businesses come and go, making way for the next big thing. California has consistently demonstrated its ability to survive and thrive.

Still, as times change, so do business decisions. While some companies choose to relocate to other states, others continue to launch and grow here. This article explores why businesses are leaving and why others continue to invest in the Golden State, backed by data and insights.

In 2024, California’s growth rate of 6% outpaced the top three economies: U.S. (5.3%), China (2.6%) and Germany (2.9%). California’s success is long-term  the state’s economy grew strongly over the last four years, with an average nominal GDP growth of 7.5% from 2021 to 2024. Preliminary data indicates India is projected to surpass California by 2026.

The In-N-Out Example: Leaving HQ, Not the Market

In a high-profile move, In-N-Out Burger announced the relocation of its corporate headquarters to Tennessee by 2026. While this sparked concern, it’s important to note that In-N-Out is not abandoning California operations. In fact, over 70% of its 400+ locations remain in California, including its original Baldwin Park site and major supply chain facilities.

Despite the HQ shift, In-N-Out will continue to generate hundreds of millions in revenue from its California stores. Estimates suggest the company brings in over $1.5 billion annually, with California locations accounting for the lion’s share—likely $1 billion or more. Those profits will now be reported out of state, raising concerns about California losing corporate tax base even when economic activity remains rooted here.

This move underscores a growing trend: corporations maintaining operations in California while relocating leadership and tax reporting elsewhere to ease regulatory burdens and reduce costs—without abandoning their strongest markets.

Why Businesses Start and Stay in California

Even with challenges, California continues to draw entrepreneurs and investors from across the globe. Why?

Outperforming the nation
California’s economy is growing at a faster rate than the world’s top three economies. According to the IMF’s 2024 World Economic Outlook data released and BEA data California’s nominal GDP reached $4.1 trillion, surpassing Japan’s $4.02 trillion, and placing California behind only the United States, China, and Germany in global rankings. California’s GDP figure is based on the latest state-level GDP data from the BEA.

1. It’s the World’s 4th Largest Economy

California’s $4.1 trillion GDP surpasses that of many countries. It leads in:

• Technology (Silicon Valley, San Diego)
• Entertainment (Los Angeles)
• Agriculture (Central Valley)
• Clean energy, biotech, and space industries

2. Access to Talent and Capital

With major research universities and a rich startup culture, California is home to:

• Stanford, USC, UCLA, UC Berkeley
• Thousands of tech firms, media companies, and creative agencies
• A large concentration of VC firms and angel investors

3. Government Support and Infrastructure

From innovation grants to export assistance, California agencies like GO-Biz support entrepreneurship and business growth. The state also allows a wide range of business entity types and flexible tax structures.

What Happens to Corporations After They Leave, are They Successful?

Leaving California may ease tax and regulatory burdens—but is it a golden ticket to success?

 Success Stories

• Oracle relocated its HQ to Austin, Texas, and has grown its cloud business rapidly.
• Tesla built a Gigafactory in Austin and expanded operations, while keeping a large workforce in Fremont.

Not Always a Smooth Transition

• Hewlett Packard Enterprise (HPE) moved to Houston but faced growing pains in talent retention.
• Dropbox downsized operations post-move, citing broader market corrections—not just location.

A Hybrid Model

Many relocated companies keep significant operations in California. Fremont, Palo Alto, and L.A. remain major R&D and marketing hubs.

Relocating may reduce costs—but long-term success still depends on vision, leadership, and adaptability.

California’s Business Landscape: The Numbers

A State in Motion

California’s economy has always been dynamic. It evolves, resets, and reinvents itself—just as its entrepreneurs do.

Yes, some companies leave in search of lower costs and fewer regulations. But many others stay because they believe in what California offers: creativity, diversity, capital access, and culture. The Golden State remains a launchpad for visionaries who understand that innovation thrives where challenges spark bold ideas.

Sources:

• Public Policy Institute of California (PPIC)

• New York Post

• Financial Times

• Business Insider

• CalMatters

• Forbes

• U.S. Chamber of Commerce

• GO-Biz California