Why GE Is Moving its Headquarters to Boston

GE's planned relocation of its headquarters from Fairfield, CT, to Boston's Seaport District is a watershed for both the company and the region. Moving to one of America's premier technology centers demonstrates that GE is serious about becoming what company executives call a "digital industrial" business -- a meld of big iron and big data. For Greater Boston, attracting the eighth largest firm in the Fortune 500 burnishes the region's reputation as a tech hub and a worthy rival of Silicon Valley for overall leadership.

With the relocation, GE is embracing Boston's special environment for software development. MIT, Harvard and the region's other great educational and research institutions are at the heart of this creative milieu. Another component is the critical mass of companies that are either software developers or whose competitive advantage comes from software. This includes homegrown success stories like HubSpot, Demandware, Akamai, and TripAdvisor, as well as units from firms based elsewhere, such as Google, VMware, Oracle, Microsoft, Cisco, SAP, and Salesforce.com.

The universities and the companies attract a rich talent pool of programmers, engineers and other key technical and professional workers who are exactly what GE or any company seeking to make its mark in software is looking for. Because of the area's vibrancy and quality of life, the tech workforce is happy to stay in the area.

Another attraction for GE is the region's leadership in software business innovation. A cluster of Boston area companies -- including Rapid7, VMTurbo, and Black Duck -- have become expert at applying the high velocity sales model to software. These businesses use Internet-based tools and strategies, such as free trials and downloads, along with inside sales or selling over the telephone. This model, which reduces the dependency on large and dispersed sales forces, has enabled Boston software firms to reach "escape velocity" faster. Notably, it has made them the envy of software companies worldwide, including Silicon Valley.

Moving a company, especially a large one, is neither easy nor simple. There are many reasons for a firm not to relocate its headquarters. GE, which is the largest manufacturing company based in the United States, needed compelling reasons to pull up stakes in Connecticut and move to Boston.

While Connecticut leaders were preparing to raise taxes on businesses headquartered in the state, Massachusetts and Boston were assembling a package of incentives to lure the company. Massachusetts Governor Charles Baker and Boston Mayor Martin Walsh worked particularly hard to win the GE prize.

Massachusetts government leaders also were able to convince the company that the state's desire for a partnership with business was not a one-time affair but rather a genuine, long-term commitment.

Connecticut's leaders made a very big error in thinking GE was bluffing when it warned that a tax hike could trigger the company's exit from the state. Lawmakers elsewhere would do well to take note: Attracting and retaining businesses is a high stakes affair.

Lou Shipley is a Lecturer at the Martin Trust Center for MIT Entrepreneurship at the MIT Sloan School of Management. He is president and CEO of Black Duck Software.

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