Characteristics of the Israeli innovation ecosystem, by David Harari, member of the Scientific committee of Israel Science Info

Dr David Harari Dr David Harari

The State of Israel is an example of the nation where technological innovation has become a priority and paramount to any scale, that affects all sectors of the country.

It has the largest number of new firms, engineers and scientists per capita. Over 50% of its export is related to high technology and more than 10% of its workforce is in the High Technology area.

Israel has more companies listed on NASDAQ in the United States, than all of Europe, China, India, South Korea and Japan combined.

Israelis can be characterised by their audacity (“chuzpah”) for a project development and the creation of a company.

Military service for girls and boys 18 years old is forging a personality of responsibility and initiative that led many Israelis to be efficient and successful.

The lack of formalism for the Israeli hierarchy, develops a character that is much more innovative.

This spirit focused on innovation is also reflected in the education system. In Israel, everything is done from high school to build and transmit a consistent culture with entrepreneurship. An effort is underway at the universities with entrepreneurship programs available to students in their university curriculum.

This educational system is widely followed by Israeli and foreign companies. EBay and Google have invested more than $ 120 million in the purchase of start-ups created by students during their studies.

To enhance academic research, Israel has implemented technology transfer centres whose goal is to transfer the technologies developed in academia to industry.

Activities such as the sale of patents have grossed over $ 400 million in only the Weizmann Institute in 2013.

In 1991, due to the reluctance of investors to finance innovative projects at an early stage, Israel has implemented a program to develop and support ‘nursery’ or ‘incubators’ of companies.

This program sought to create a financial framework to support the creation of a business, based on the exploitation of a technological innovation. The program targeted technologies at early phase that had presented the highest risk for investors.

In addition to financial assistance, the incubator offers various services and management consulting. The new entrepreneur receives financial support and legal advices in marketing and in searching for potential investors.

Incubators, 26 in number, are specialised in various business sectors like life sciences, agriculture, electronics, medical equipment or information technology.

In addition, there are about forty ‘accelerators’.

An accelerator is similar to an incubator, but lasts for 6 months instead of 24 months. Its purpose is to help students and young newly entrepreneurs who immigrated to Israel. This compensates for their lack of knowledge and their necessary relationships in the Israeli society. They receive legal, financial and commercial coaching.

In the past, since investment was based on public funds, the incubators were non-profit entities. They belonged mostly to universities, research centres or local authorities. As the success of several start-ups became evident, private investors started to invest in these incubators. Today, in most cases, private investors own incubators. Professional and experienced investors provide a network of contacts and experience to raise funds and find international markets.

State funding in incubators grew up by 6% per year between 1991 and 2008. On the contrary, private funding has grown at much faster pace. In 2008, private funding reached 2.509 billion US $, which is five times more than the 509 million US $, provided by the State.

The State of Israel offers several advantages to investors and international firms. For example, we can highlight its participation in various European research programs (PCRD and EUREKA) and CERN.

Israelis are characterised by a willingness to engage in a genuine partnership with foreign manufacturers. They accept and develop the technological dialogue and are able to absorb foreign knowledge, without being complexed by the syndrome of “Not Invented Here“.

A French-Israeli exchanges program implementing incubators and accelerators of the two countries is set up in order to promote technological exchanges.

France Clusters federating the French clusters could create synergies between potential French and Israeli partnerships.

In conclusion, we can summarise the elements highlighting how Israel can be an example of an innovation country:

  • The ability of universities and research centres to form a high quality workforce and develop new technologies
  • Israeli culture supports audacity and risk taking.
  • The presence of international firms provides expertise and economic support.
  • The availability of venture capital supporting news ideas.

Dr David Harari is a member of Israel France Chamber of Commerce and Industry whose President is Daniel Rouach.

Find this article in Israël Science Info n° 14

Israël Science Info