The Lone Star state’s two biggest corporations—energy company ExxonMobil and pharmaceutical manufacturer McKesson—accounted for roughly 26% of its Fortune 500 revenue and 25% of its profit. That’s unsurprising, considering they’re ranked third and ninth on the list.  

Economic development experts in Texas cite the state’s low cost of living, favorable regulatory environment with no corporate or individual state income tax, and growing pool of tech talent as reasons why it has attracted and retained so many corporate headquarters. 

An October 2022 study by the Commerce Department’s Bureau of Economic Analysis found that Texas’s average cost of living was just over $45,000, roughly $8,000 lower than California and New York, the states with the second and third most Fortune 500 companies. Another study, from the Missouri Department of Higher Education and Workforce Development, found Texas’s cost of living is below the U.S. average.

This year’s Fortune 500 ranking shows that the energy sector dominates the state’s economy, comprising 26 of the 55 Texas-based companies on the list and pulling in a combined $1.4 trillion in revenue. Three other companies—Westlake, Celanese, and Huntsman—are technically in the chemical production sector but regularly use petroleum byproducts to make things like plastic goods and adhesives. So while not necessarily energy companies, they’re tangential to the industry. Houston, known as the world’s energy capital, possesses 17 of the state’s energy companies, including the $175.7 billion Phillips 66. ExxonMobil will join its peers in Houston when it moves its headquarters from Irving, Texas (just outside Dallas), in the spring of 2023.  

Despite Texas’s reputation as the center of the fossil fuel industry, its investment in renewable energy is attracting companies considering a move to the state, says Craig Rhodes, vice president of regional economic development at the Greater Houston Partnership, the city’s chamber of commerce. Texas had the largest capacity of wind-powered electricity in the U.S., according to the World Economic Forum, and ranked second in the country for solar energy, according to the industry’s trade association. 

“Companies have a lot of aggressive goals that they want to achieve for their own ESG initiatives and carbon footprint, so we see a lot of interest and questions now about access to renewable power,” Rhodes says. However, recent efforts by Lt. Gov. Dan Patrick and lobbies for coal and gas power plants could hinder future investment in renewable energies. 

Austin is making a name for itself as a tech hub, attracting high-profile companies like Tesla and Oracle. Both companies moved from California in late 2020 and are indicative of a growing startup scene in the Texas city, says Stacy Schmitt, vice president of corporate retention and expansion at Opportunity Austin. 

“Austin has been a magnet for innovation and entrepreneurship in a very diverse range of industries, from established companies to startups,” she says. “It’s a very collaborative environment here in Austin, and that works well for tech communities.” 

Other companies that have transitioned to Texas include Hewlett Packard Enterprise (HPE), which in 2020 officially moved its headquarters to Spring, Texas, where most employees resided.

“With opportunities for cost savings over the long term and team member preferences about the future of work, designating our Spring campus as headquarters made sense for our business,” HPE said in an email. Companies are also attracted to what HPE called Texas’s “strong university ecosystem,” which offers a reliable pipeline of young talent. 

“In today’s environment, companies want to be in a place where they can pivot,” says Mike Rosa, senior vice president for economic development at the Dallas Regional Chamber. “They don’t want to find themselves in a one-trick town… They see the array of technologies and universities, and they know that if their company needs to look a little different five years from now, those puzzle pieces are here.”

Although recent political developments in Texas have hampered employer efforts to recruit a younger, more diverse workforce, one statewide pro-business official says these decisions haven’t been a “determining factor” for companies considering Texas as a corporate headquarters even when they’ve come up.