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U.S. Regions
Delaware: Business Central
The nation's Fortune 500® enclave is now an incubator of hot-idea companies.
When pharmaceutical giants Astra and Zeneca merged in 1999, decision-makers faced a dilemma. Zeneca had a U.S. headquarters in Wilmington, Del. Astra had a U.S. headquarters in Wayne, Pa. But London-based AstraZeneca, now among the world's top five pharmaceutical companies, required only one corporate base stateside.
Delaware moved quickly. The state's proposal, outlined a package that included tax incentives and a land grant.
The offer was too good to refuse. AstraZeneca's 158-acre Wilmington campus today houses over 4,000 employees, and upon completion in 2007, will house nearly 7,000. The site is the center for the company's research and development of treatments for central nervous system disorders.
Shortly afterwards, ING Direct, part of Amsterdam-based ING Group, one of the world's largest financial institutions, was opening an Internet banking operation. The company chose Wilmington's riverfront as its launch pad. Since then, ING Direct has garnered more than one million customers, who've earned $225 million in interest. Today the company boasts $10 billion in assets.
The decision to locate in Delaware was clear-cut. "Delaware is pro-business, which isn't something you find in all states," says Arkadi Kuhlmann, president and CEO of ING Direct. Indeed, the First State takes business seriously. Consider Delaware's favorable tax climate. Its corporate tax rate is only 8.7% on net income. In addition, there's no sales tax or equipment tax. Delaware's Chancery Court is the international forum for hearing corporate disputes.
Moreover, Delaware's proximity to four metropolises‹New York, Philadelphia, Baltimore, and Washington, D.C.‹makes it the East Coast business hub. It's the central meeting ground for a variety of industries, including finance, technology, agriculture, and manufacturing. No wonder Delaware is called the world's corporate capital.
Delaware's business culture dates to 1802, when Eleuthère Irénée du Pont founded E. I. du Pont de Nemours & Co. Over the next century, DuPont moved from explosives to scientific research. Teflon and nylon are now household names known worldwide. DuPont's rapid innovations prompted the development of efficient legal processes. "Now when a company wants to incorporate, it literally can happen in a matter of minutes," says Judy McKinney-Cherry, director of the Delaware Economic Development Office.
The result is impressive. Some 300,000 companies, including more than half of the Fortune 500®, are incorporated in Delaware. International delegations visit Delaware to learn the system, "but imitation is never as good as the original," McKinney-Cherry notes.
Not surprisingly, Delaware has a wealth of corporate case law. The celebrated Chancery Court, dedicated to corporate issues, has set the stage for landmark business decisions. A recent Harris poll of 824 senior corporate lawyers commissioned by the U.S. Chamber of Commerce ranked Delaware's court system first in all ten categories, including timeliness of legal judgments, judges' impartiality, and jury fairness. Nearly 80% of respondents said the legal climate affected their decision to do business in the state.
Delaware's corporate tax statute offers significant savings for passive investments held in the state. It's fertile ground for holding companies. Other organizations also benefit. Research and development firms can carry net operating losses as a tax advantage for over 15 years. Money goes to producing the product. "It's a good place to do business as a corporation," says Arnie Caine, vice president of facilities, engineering, and corporate services for AstraZeneca.
The financial benefits appealed to Ruth Ellen Miller, president of NoUVIR Research in Seaford. Miller started her fiber-optic lighting company in her native California. When she transitioned from research to manufacturing in 1995, she moved to Delaware. California wanted about 13% more of her payroll for workers' compensation, recalls Miller. She hated wrangling with sales tax. She prefers Delaware's gross-receipt method. "You figure out how much money you make in sales, and pay a percentage," she says. She also appreciates Delaware's affordability. NoUVIR resides in a 10,000-square-foot facility and a Victorian house. "In California this would have cost me millions of dollars," she notes. But it takes more than money to run a business. It takes people. The plethora of academic and research institutions in the state have deepened the talent pool. "You have access to a great pool of workers in Delaware," ING's Kuhlmann says. A hotbed for inventors and researchers, Delaware ranks second in the U.S. behind Connecticut in the number of doctoral degrees per capita.
Developing relationships with decision-makers is easy. At 2,057 square miles Delaware is intimate. Business leaders connect with legislators at social events, festivals‹even grocery stores. "I have met just about every policymaker in Delaware," Kuhlmann says. "Again, that's something you don't find very often."
Legislators are dedicated to nurturing businesses of all sizes. Before Governor Ruth Ann Minner went full-time into public service, she owned a towing business. She knows what's required to build an entrepreneurial enterprise.
Delaware sports a small-town affability, yet it also boasts cutting-edge sensibilities. Many corporations stand on technology's forefront. Astra-Zeneca's portfolio contains the world's leading cancer and gastrointestinal disorder treatments, along with drugs to treat cardiovascular disease, respiratory disorders, central nervous system disorders and pain and infection. The company's success ratio for bringing new products to market is remarkable.
The state is building a leading high-technology industry, especially in the field of biotechnology, according to Caine. Delaware has recruited academia and private industry to incubate new business. The state initiative makes sense when you consider its location. More than 80% of the pharmaceutical industry in the U.S. is within a two-hour drive from Wilmington. One of the biotech industry's high-fliers is NaPro BioTherapeutics, which focuses on the development, production and licensing of complex natural-product pharmaceuticals. Located at the Delaware Technology Park in Newark, NaPro recently entered into an agreement with the University of Delaware to research DNA models. Researchers hope to alter genes without introducing foreign DNA. The research could lead to improved food crops and human-disease treatments. Fraunhofer-Gesellschaft, Germany's leading applied research institute, also recently selected the Delaware Technology Park as home for its first biotechnology research center in the United States.
New projects include The High Technology Incubator, which is under construction at the Delaware State University in Dover. "It's an excellent example of the cooperation between the university system, business, and state government," says James J. Roszkowski, special economic development advisor to Governor Minner.
Similar collaboration spawned the Delaware Biotechnology Institute located at the Delaware Technology Park. The two year-old institute marries experts with top-notch facilities. The 72,000-foot research facility can serve about 170 faculty and student researchers. It has 23 laboratories and strives to foster startup companies. The institute already has made remarkable advances. Scientists from the University of Delaware and the University of California at Santa Barbara are researching materials that could lead to human-organ replacements.
Delaware's pro-business climate has long-range appeal for a wide range of industries beyond the technology sector. Financial firms began earnestly banking on Delaware in 1981, when the Financial Center Development Act was enacted. The act liberalized laws that governed banks operating there. In particular, it eliminated consumer-rate restrictions. Today, Delaware houses six of the ten banks with the highest volume of credit card lending. Among notables are Wilmington-based MBNA, the second-largest issuer of Visa and MasterCard credit cards; and ING Direct. Since the firm lacks brick-and-mortar branches, it offers high-interest savings accounts and low-interest home-equity credit lines regardless of customers' locations.
Agriculture, which represents nearly 10% of the gross state product, is another mainstay. In 2001, the Perdue AgriRecycle LLC, micronutrient plant opened in Seaford. The 65,000 square-foot facility can convert poultry waste into tons of fertilizer pellets.
No matter the address, Delaware businesses are close to major cities. Kuhlmann, who frequently travels to New York and Washington, D.C., says Delaware's location makes it a "hidden gem." A busy port links Delaware to water commerce. Train traffic is brisk.
At the same time, Delaware is a great place to live. It's affordable and it has great amenities. A family earning $40,000 and purchasing homes of comparable size and quality can pay 11% less than the national average for a home in Dover, Delaware's capital.
"We are well situated for the company that needs access to cities and research facilities, yet still wants a high quality of life and low cost of living for it's employees," McKinney-Cherry says. These attractions make Delaware a great place to incorporate.
For more information on business opportunities for your company in Delaware, visit www.state.de.us/dedo or contact a Delaware business development specialist at 866-284-7483.
www.astrazeneca-us.com
ww.ingdirect.com
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