Database connection fails with Local IIS but works with IIS Express - entity-framework

Question

I am working on MVC with Entity Framework. My solution is able to connect to database, SQL Server 2008 R2, when I run my solution with IIS Express, as soon as I change to Local IIS, it starts throwing error: An exception of type 'System.Data.Entity.Core.EntityException' occurred in EntityFramework.SqlServer.dll but was not handled in user code.
While Error Message was: The underlying provider failed on Open.
I am able to browse through pages which do not require database connection.
Following is the web.config file
<configuration>
<configSections>
<section name="entityFramework" type="System.Data.Entity.Internal.ConfigFile.EntityFrameworkSection, EntityFramework, Version=6.0.0.0, Culture=neutral, PublicKeyToken=b77a5c561934e089" requirePermission="false" />
</configSections>
<appSettings>
<add key="webpages:Version" value="3.0.0.0" />
<add key="webpages:Enabled" value="false" />
<add key="ClientValidationEnabled" value="true" />
<add key="UnobtrusiveJavaScriptEnabled" value="true" />
</appSettings>
<system.web>
<compilation debug="true" targetFramework="4.5.2" />
<httpRuntime targetFramework="4.5.2" />
</system.web>
<runtime>
<assemblyBinding xmlns="urn:schemas-microsoft-com:asm.v1">
<dependentAssembly>
<assemblyIdentity name="System.Web.Helpers" publicKeyToken="31bf3856ad364e35" />
<bindingRedirect oldVersion="1.0.0.0-3.0.0.0" newVersion="3.0.0.0" />
</dependentAssembly>
<dependentAssembly>
<assemblyIdentity name="System.Web.WebPages" publicKeyToken="31bf3856ad364e35" />
<bindingRedirect oldVersion="1.0.0.0-3.0.0.0" newVersion="3.0.0.0" />
</dependentAssembly>
<dependentAssembly>
<assemblyIdentity name="System.Web.Mvc" publicKeyToken="31bf3856ad364e35" />
<bindingRedirect oldVersion="1.0.0.0-5.2.3.0" newVersion="5.2.3.0" />
</dependentAssembly>
</assemblyBinding>
</runtime>
<system.codedom>
<compilers>
<compiler language="c#;cs;csharp" extension=".cs" type="Microsoft.CodeDom.Providers.DotNetCompilerPlatform.CSharpCodeProvider, Microsoft.CodeDom.Providers.DotNetCompilerPlatform, Version=1.0.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" warningLevel="4" compilerOptions="/langversion:6 /nowarn:1659;1699;1701" />
<compiler language="vb;vbs;visualbasic;vbscript" extension=".vb" type="Microsoft.CodeDom.Providers.DotNetCompilerPlatform.VBCodeProvider, Microsoft.CodeDom.Providers.DotNetCompilerPlatform, Version=1.0.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" warningLevel="4" compilerOptions="/langversion:14 /nowarn:41008 /define:_MYTYPE=\"Web\" /optionInfer+" />
</compilers>
</system.codedom>
<entityFramework>
<defaultConnectionFactory type="System.Data.Entity.Infrastructure.SqlConnectionFactory, EntityFramework" />
<providers>
<provider invariantName="System.Data.SqlClient" type="System.Data.Entity.SqlServer.SqlProviderServices, EntityFramework.SqlServer" />
</providers>
</entityFramework>
<connectionStrings>
<add name="EmployeeContext" connectionString="server=.; Database=Database1; integrated security=SSPI"
providerName="System.Data.SqlClient"/>
</connectionStrings>
</configuration>