Sixty-five years ago, Charlie Hess’ grandfather opened a small electronics manufacturing company in Canada.

Today, Hess, now president and part owner of St. Clair Technologies, still operates an office in Canada, but he’s moved most business operations to Chandler.

Hess said he “lucked into” his Chandler location while looking for a United States headquarters that was close to Mexico, where he employs 1,000 manufacturing workers who produce electrical systems for automobiles. In turn he discovered an “innovative city” that has offered vast customer potential, networking opportunities — and sunshine.

“We really just wanted to shift out of the slow lane and into the fast lane in terms of innovation and that’s why I love it here, and so do all of my team,” Hess said.

St. Clair Technologies is one of more than 200 Canadian companies that have opened shop in Arizona, making Canada the country with the largest international business presence in the state — by a long shot.

It’s a byproduct of the “longtime love affair” between Canada and the United States that blossomed in the past decade, according to Glenn Williamson, CEO and founder of the Canada Arizona Business Council.

Because Canada’s market is so small in comparison to the United States, Canadian companies have always looked for ways to tap into American cities, according to Andreas Schotter, assistant professor of international business and global strategy for the Ivey Business School at Western University in London, Ontario.

Schotter said Canadian companies typically located in states that were close to the border, like Michigan and Illinois. But recently, large companies have followed their clients to other cities throughout the U.S., while small and medium-size companies have started looking to Western states for weather and lifestyle perks.

“Livability in Arizona is, of course, attractive,” Schotter said.

When an international company opens a facility and employs people in Arizona, it must pay city, state and employee taxes, which is an incentive for Valley cities to vie for Canadian businesses, Williamson said.

With little local prompting, hundreds of companies have migrated to Arizona. An increase in proactive work to attract Canadian companies could make the Valley’s connection with Canada flourish even more, he said.

It’s a message resonating with some of the region’s outskirt cities, like Surprise, Buckeye and Gilbert, which have plenty of shovel-ready land and a thirst for investment — and whose officials make frequent trips to the region to woo investors.

An analysis by the Maricopa Association of Governments in September found 241 Canadian businesses in Arizona, employing more than 22,000 Arizonans. That’s nearly double the U.K., which is second highest. While many people think of Mexico as a natural international business partner because of its proximity, only 33 Mexican businesses are in Arizona.

Why do Canadian businesses love Arizona?

As Valley cities work to entice Canadian companies, they’ve found several effective selling points for the state.

It’s not California: When the leaders of Silent Aire, a custom heating and cooling system manufacturer, were searching for a United States headquarters location, they knew they wanted to be West of the Mississippi River — but they quickly ruled out California.

The cost of relocating and doing business was too high, vice president of operations Brett Manning said.

Greater Phoenix Economic Council President and CEO Chris Camacho said that’s a common realization for businesses looking to locate in the Southwest. Phoenix markets itself as a prime location near the lucrative Los Angeles market, but free from California’s pricey real estate and additional regulations.

Growing Industry: Manning said it didn’t take long for him and his team to realize that the Valley was a “tremendously good fit” for his company. Local and regional governments worked with them to prove their business would be supported, he said.

“We started kind of investigating and … we came down here to start our search and never really left,” Manning said. Silent Aire’s Arizona office is located in Gilbert.
Camacho said some of the top Canadian industries — aerospace engineering, consumer product manufacturing and financial services — overlap with opportunities already available in the Phoenix area.

Hess said he was “surprised positively that there was so much action here.” He said he’s had opportunities to work with companies “as big as Honeywell” and other interesting and unique local companies.

Schotter, who was a professor at Arizona State University’s Thunderbird School of Global Management for four years before moving back to Canada, said Arizona also appeals to Canadian entrepreneurs because there are fewer barriers to opening a business in Arizona than in Canada.

Weather and amenities: Most Canadians who decide to move their businesses here have visited Arizona for vacation and fallen in love with the amenities, said the business council’s Williamson.

“Most Canadians that come down here are fairly affluent. If you’re Canadian and you can afford to come down this way, much less move your company this way … you’re looking for lifestyle and you’re looking for comfort,” he said.

Hess, who opened his Chandler office about four years ago, said he’s moved his entire management team to Arizona.

“It wasn’t a tough sell for me to bring my Canadian group here because it’s a great place to live,” he said.

Schotter said now that many businesses are technology-driven instead of factory-driven, it’s easier for them to move across the continent to places with more desirable climates than the North and Midwest.

Williamson said while business factors are important, the quality-of-life factors can provide equal motivation.

“As silly as it sounds, the weather … is a major, major decision-maker,” he said.

Still some untapped potential

Williamson said while the number of Canadian businesses locating in Arizona ticks up, and while in winter it may seem like Canadian license plates are everywhere, gobs of untapped potential exists.

Each year, about 24 million Canadians visit the Unites States, he said. Florida gets about 4.5 million of those visits. Las Vegas sees 2.4 million and California pulls in a couple million. Arizona gets just over 1 million.

“We barely get our market share,” Williamson said.

Why does tourism matter for business? Canadian business owners often choose to move their companies to places they’ve visited and enjoyed, he said.

On top of attracting Canadian visitors, cities need to forge relationships with businesses, Williamson said.

Surprise has embarked on that mission. City staffers took 10 trips to Toronto last year to meet with companies looking to expand in the United States— racking up more than $30,000 in travel costs, according to city documents.

But city officials said their trips to Canada aren’t only about winning over Canadian businesses.

“Toronto is perhaps the most ethnically diverse city in the world,” Assistant City Manager Rick Buss said. “Over 130 languages are spoken there. A third of the population wasn’t born in Canada. It’s truly a gateway to the world for us.”

Some Surprise council members have asked questions about the amount of travel and money spent trying to lure businesses in Canada. To date, the city has not announced any relocates from the country.

“Can we guarantee (new Canadian investments in Surprise)? Absolutely not. Can we put our best foot forward moving the decision process forward? Absolutely.”
Surprise Assistant City Manager Rick Buss

Economic Development Director Jeanine Jerkovic said it’s necessary that they be on the ground to make connections, because people “like to do business with people they like.” She said city officials have traveled to Canada for a little more than a year, but it usually takes 3-5 years from a first encounter to a commitment.

“It isn’t just money, there’s emotional and physical investment,” Jerkovic said.

Buss said the city likely will announce some new investments out of Canada in the next year, but he’s not certain.

“Can we guarantee it? Absolutely not. Can we put our best foot forward moving the decision process forward? Absolutely,” he said.

Other cities, like Mesa, Peoria, Gilbert and Buckeye have also worked with GPEC and the Canada Arizona Business Council to network with Canadian companies, Camacho and Williamson said.

Canadian businesses already in the Valley are eager to help cities like Surprise lure other companies by spreading their success stories. Both Manning and Hess said they are involved in efforts to promote the opportunities the Phoenix area has given them.

“We’re Canadians and we’re supposed to be the nice guys of the world so that’s why we do it,” Hess said.