Israel’s 1,000 high-tech businesses now account for two-thirds of the country’s exports.Israel has been singled out, along with a group of eight countries in Europe, Asia and North America, as a center for high-tech wealth creation in a new book devoted to analyzing the phenomenon of entrepreneurship.
Each of the Big Nine of innovation cited by authors Jeff Saperstein and Daniel Rouach in “Creating Regional Wealth in the Innovation Economy” has had its own assets and liabilities in striving for economic development, high wages and investment growth that high-tech development can bring.
The authors analyze the entrepreneurial strengths and weaknesses of the nine nations and regions, which include California’s Silicon Valley; Ireland; Munich, Germany; France’s Sophia Antipolis technology park; Cambridge, England; India; Taiwan; and Sweden, as well as Israel.
The United States, represented by Silicon Valley, has used relatively free access to worldwide technology talent, a huge pool of venture capital and equity funding, and the presence of a huge market within its borders to become an unprecedented wealth creator.
Other countries, including Germany and France, represented by high-tech clusters in Munich and Sophia Antipolis, in Provence, respectively, have been less-successful in developing high-tech industries despite government investment, in part because of ingrained barriers to cultural change in their workforces and in attitudes towards customer service, the authors say.
Israeli high-tech, however, has taken the necessary steps to overcome major barriers to its success, including war and security issues, lack of natural resources, small size and physical isolation from major markets, in part by relying on partnerships with overseas companies as a means of selling its technology.
Home-grown technology and innovation has been the key to the nation’s economic prosperity. Israel, with only 6 million residents, has over 1,000 research and development based businesses that now account for about two-thirds of its exports. To date, more than 150 foreign companies have invested in Israeli research and development.
The nation has come a long way in a very short time. In the 60s, 70 percent of its export trade was in oranges and other agricultural products, a figure that has fallen to about 3 percent today.
Imported high-tech know-how has also been bolstered by immigrants from the former Soviet Union, who have contributed to the pool of 50,000 engineers and scientists employed in Israeli industry and at its seven research universities.
“(One) source of this entrepreneurial spirit might be the vital need to manage in a country with very few raw materials, which necessitated creating intellectual value to survive against worldwide competition,” according to the authors.
Saperstein and Rouach also see a small silver lining to the cloud of the continuing conflict with Arab world, in the ability of Israeli entrepreneurs, many of whom received training specific to their companies’ technologies in the Israel Defense Forces, to react quickly and skillfully to changes in the business environment.
To perpetuate its success in technology, the Israeli government started a technological incubator program in 1991, which essentially assumed the risk of investing in early-stage companies when private investors would not. About 24 of these incubators, which provide entrepreneurs with workspace, financial resources, tools, and management advice, are now operating in Israel, with more than 750 projects launched, according to the authors.
“Creating Regional Wealth in the Innovation Economy” is part of a series of books on international business, economics and technology published by Financial Times Prentice Hall.