Israel Is The Ultimate American Welfare State

Danish Enterprise Authority
The final chapter of the Entrepreneurship Index focuses on Israel as an entrepreneurial country. Israel has more companies listed on NASDAQ than any other country except the US, in spite of the fact that the population of Israel is only 7.6 million. In addition, Israel has more civil engineers per capita than any other country in the world. In 2008, sixteen times as much venture capital was raised and more than four times as many patents were taken out in Israel as in Denmark. Israel’s acceptance to OECD cooperation this year and its inclusion in the international benchmark index from next year are commemorated by this profile chapter.

The chapter takes a closer look at a nation which is singled out as a model for others attempting to build up an entrepreneurial, innovative economy. There is actually a special “Israeli Model” which other countries already use as a source of inspiration. The lessons to be learned from Israel are threefold.

First, the public sector kick-started and thus decisively influenced the development of Israel’s entrepreneurial policy. By establishing the Office of the Chief Scientist (see Box 5.6) in the mid-1980s, with the infusion of massive public venture funding in the 1990s and the establishment of incubator environments at roughly the same time, the state gave a high priority to promoting new high-tech enterprises and facilitating the creation and diffusion of knowledge.

Second, Israel’s entrepreneurial policy is powered by an efficient public-private partnership. A number of schemes under the auspices of the Israeli Ministry of Industry, Trade and Labour support the interaction of public-sector business service centres with private-sector consultants so that new enterprises receive optimal advice.

Third, and just as important, Israel developed its entrepreneurship policy over a long period of time. In other words, the “Israeli Model” cannot be implemented overnight. Moving all the way up to the world elite requires a persevering effort, a lesson Israel has also learned.

Explanations of Israel’s success

Generally speaking, it must be noted that Israel has succeeded, in spite of – or perhaps by virtue of – the country’s unique geopolitical and historical circumstances, in creating a favourable ecosystem for high-growth start-ups in the country’s technology-driven sectors. Observers of and experts in Israel’s success story typically point out several reasons for Israel’s success

A successful business policy. An active innovation and entrepreneurship policy by the Israeli government, which from the 1990s intensified its efforts to cultivate good investment and growth opportunities for Israel’s high-tech enterprises. This includes several successful programmes initiated by the government targeting new enterprises, some of which are described in this chapter.


Research and development.The commitment to high-tech sectors is underpinned by a high percentage of highly educated people in the work-force, and a number of distinguished research institutions. This also includes the innovative dynamism generated by the Israeli military and the associated defence industry.

The high level of R&D investment should also be seen in the light of the fact that many foreign companies have chosen to place their research activities in Israel.

One of them is Intel, which in 1974 opened its first design and development centre outside the US, in Haifa, initially with five employees. Today there are 6,000 employees in production and R&D. It is assessed that 220 R&D centres have currently been set up in Israel belonging to large multinational corporations like Alcatel, Deutsche Telecom, Cisco, Google, HP, Merck, Microsoft and IBM. The enterprises have a combined total of 50,000 employees in Israel (Eureka, 2010).

Due to its leading position in the R&D field, Israel is also interesting from a Danish perspective. For this reason, the Ministry of Science, Technology and Innovation has entered into a bilateral cooperation agreement A society’s ability to transfer knowledge from universities to the business community is a decisive competitive parameter in the global economy. Today, both Denmark and Israel have a national research environment of high international calibre

In the case of Israel it is emphasised time and again that starting your own enterprise, standing on your own two feet, “hungering” to run something big and – not least – being willing to run a risk are integral aspects of Israeli culture.

Asserting that an entire population share a number of common characteristics which jointly constitute a national culture is difficult to prove, however. The cultural aspect is only mentioned here to point out that society can play a part in terms of motivating children, young people, students, and employees in private enterprises or the public sector to regard a career of self-employment as an attractive way of life. This not an implicit aspect of a society’s culture, but it can be nurtured using measures to influence the culture.

Many people speak of a special Israeli mentality, expressed by the Hebraic concept of “chutzpah” which translates into something like “devil-may-care”, “audacity” or “impudence” (Senor and Singer, 2009). The concept captures what many people perceive as instrumental for creating a social culture that is particularly favourable for entrepreneurship and innovation.

Research into entrepreneurship often distinguishes between entrepreneur-ship driven by opportunity and entrepreneurship driven by necessity. For instance, it is emphasised that the high level of entrepreneurial activity in developing countries is explained by the fact that they do not have any other options (GEM, 2005). A related effect could easily be the case for Israel.

The Israelis themselves largely explain the cultural elements promoting entrepreneurship in their society as a result of the country’s unique geopolitical history. For a relatively young country established in a region of hostile neighbours, it is easy to imagine that a certain degree of necessity and a collective nation-building mentality have contributed to boosting the aspiration to stand on one’s own two feet, run a risk and take a devil-may-care attitude.

5. Profile of Israel: An Entrepreneurial Country - 2010 Entrepreneurship Index
 
KPMG: Israel Spreading Its Wings, Growing Internationally
Israel's private equity sector has really only taken off in the last five years and it is increasingly ambitious internationally. Financed both by domestic sources and foreign investment, the capital exists to make a significant mark on the international financial scene. Hillel Schuster explains.

Israel has a dynamic, technologically advanced market economy, with a GDP of approximately US$200 billion. Over the past five years, GDP has grown by an average of five percent annually, while inflation has been near zero and the Israeli Shekel has remained stable versus the US Dollar. The Bank of Israel's interest rate is at a record low, at 0.5 percent, and is among the lowest in the world. Manufacturing (low-to-high technology products and services), constitutes 87 percent of total exports. In addition, there are more Israeli-domiciled companies traded on NASDAQ (currently 63) than in any country outside the US.

The country's entrepreneurial and competitive environment is underpinned by a number of cultural and social factors. Education is one of the key drivers with high numbers of science and engineering students graduating each year - Israel boasts a ratio of 135 scientists per 100,000 workers, the highest in the world

In all, approximately US$4.2 billion of capital has been invested in Israeli private equity firms10. Markstone Capital, with nearly US$800 million of assets under management, is supported among others by the New York State retirement fund. Tene Capital was established to invest into Israel's kibbutzim (community cooperatives) and is supported by local financial institutions.

KPMG - April 2011 - frontiers in finance: Spreading its wings
 
Policy Dialogue on Entrepreneurship: Lessons From Israel
Israel is one of the most innovative nations on earth. Israelis (approximately 7.6 million in number) are well-educated, have a global outlook, ties around the world, and most importantly, a positive view of entrepreneurship. Most Israeli entrepreneurs understand ways of moving innovations into the marketplace and how to establish themselves as global companies from the get go. It is only natural that there is so much interest around the world in Israel’s entrepreneurship path.

Israel has focused a lot of its efforts on finding and nurturing high-growth entrepreneurial firms, including universities. Granted, many start-ups have failed, but a number have succeeded and grown quickly. The result: Israeli high-growth start-ups have been creating jobs and generating sustainable wealth for the country, and innovations for the world (e.g., the USB memory stick, new generation cardiac stents, and camera pills that transmit pictures from inside the human body). Israel is often referred to as "startup nation" and a high-tech superpower.

The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer. I thought it might be useful to recap some here:

1950s: Israel’s first and fourth presidents were scientists. Both believed strongly in the role of science in national defense and societal prosperity.

1960s: R&D got a significant boost in the 1960s when military self-reliance became defense policy. In 1968, the government established the Office of the Chief Scientist (OCS) not a Secretary of Commerce or Treasury to help fix market failures in commercializing R&D.

1970s: Israel’s first NASDAQ IPO took place in 1972; Intel opened in Israel its first international R&D center in 1974; and the BIRD foundation was created to fund technology-based product development between Israeli and US companies in 1977.

1980s: top-tier VC investments flourished. In 1984, the NASDAQ value of the first wave of a dozen Israeli tech ventures was $780 million. In 1984, the government passed the Law for the Encouragement of R&D. And in 1987, when the cancellation of a fighter-plane mega-project flooded the market with engineers there was not union discontent, but a new wave of start-up entrepreneurs.

1990s: by 1997 there had been 68 NASDAQ IPOs. However, Israel’s culture and institutions were still very much anti-entrepreneurial until the mid-1990s (e.g, labor and the government owned large portions of the economy, and marginal tax rates discouraged extra work). Notable in this is decade was the great wave of immigrants from the former Soviet Union, largely with…yes, engineering talent.

2000s: Despite the breakdown in the peace process, Israel garnered an increasing larger market share of global venture capital.

2010s: Israel was one of the last countries to enter recession and among the earliest to exit. There are more Israeli NASDAQ IPOs than from any other country outside of the U.S. and Canada. On a per capita basis, Israel leads the world in the number of high-tech start-ups and the size of the venture-capital industry. And, the army continues to act as an incubator for high-tech talent and is part of a problem-solving culture. Finally, a brunt of the R&D investment has been channeled toward a now burgeoning clean tech sector in Israel.

Apparently, what is often referred to as a high-tech entrepreneurship miracle is the result of a chain of events intersecting public policy, education, culture, links with foreign source of support, and leadership. Aware of this, policymakers should continue to build the capacity of the country to innovate by strengthening or activating the many building blocks of the entrepreneurship ecosystem. As some commentators are remarking about China, building infrastructure will not sustain growth rates, but fuelling an organically created ecosystem can.

As the rest of the world tries to reboot economies, there are insightful lessons to be learned from Israel's path to entrepreneurship-based economic growth.

Lessons from Israel - Entrepreneurship.org
 
Israel: An Emerging Leader in Clean Technologies

Climate concerns show no sign of abating. But today, this challenge has a silver lining. Like doctors racing to find a cure for a deadly disease, countries are competing to find the best methods to solve global warming, building entire markets around their quest. Israel is one of the most prominent of them all. After establishing the country as the leader in green technologies like micro-irrigation and water desalination, Israeli start-up firms have embraced clean energy solutions. Their early successes are attracting Silicon Valley venture capital firms to fund more Israeli clean technology enterprises. With its homegrown technical expertise and a highly-skilled and educated workforce, Israel is better placed than most other countries to develop alternative energy technologies.

And Israel is clearly leveraging that advantage. Seambiotic, an Israeli start-up, has developed the technology to grow algae using waste gas from coal-based power plants. Besides animal and fish feed, the algae can also be used to produce bio-fuels. And Brightsource, a solar thermal energy firm, has designed what it calls ‘power towers’ which generate superheated steam by focusing sunlight to a boiler using an array of mirrors. Efficient turbines run on the superheated steam, which is converted back to water and sent back to the boiler to be reused. Brightsource has now inked contracts with electric utilities in California to set up solar thermal plants in the Mojave Desert. Ormat Technologies is already a leading manufacturer of geothermal power equipment, though Israel has no geothermal energy sources.

With the approximate size of New Jersey and a population of a mere 7.5 million, how has Israel forged ahead in a highly competitive sector like clean technology? Among others, the most relevant answer is necessity. The Israeli landscape, made up of long, shimmering stretches of desert, has forced the people to be resourceful. Before clean technology became a fashionable topic of conversation and an environmentalist pursuit, Israel had been quietly practicing green thinking in its community farms, or kibbutzes. Since then, the country has been squeezing out the maximum results from the sun, wind, soil and water. This is true, especially of water, particularly in the practices of drip irrigation, water reuse, recycling, and reclamation technology. Israel currently leads the world in wastewater management by recycling 70% of its wastewater, three times more than that of Spain, the second on the list.

What’s more, Israel has one of the most technically trained workforces in the world, boasting 135 engineers per 10,000, surpassing the United States. This has been one of the pins tagging Israel on the world map. Akin to a gold rush, venture capitalists from all over have flocked to invest in Israel. Around 40 venture funds, most of them from the U.S., are now estimated to have over $10 billion under management in Israel, with a major chunk devoted to the clean technology sector. Israel even has a cooperation agreement with the U.S., signed into law in 2007 by then President George Bush, which allows the two countries to work together on renewable energy projects.

Apart from its electric car efforts, Israel is bulking up its wind energy sector, planning to triple the use of wind energy in the next ten years. Sovna, an Israeli start-up, has pioneered wind energy farms in urban environments using small turbines placed on roof tops. But the biggest potential for wind energy lies in the Golan Heights, a windswept plateau. Its far-reaching landscape already contains 18 wind turbines originally used in times of antiquity. If all goes according to plan, by 2011 these aging structures will be replaced with the first of seven wind turbines.

Israel has been acclaimed as one of the most resilient economies in the world and recently gained entry into The Organization for Economic Cooperation and Development (OECD). This is a turning point, as the country finds its place at the table among the major economies of the world. Through its exports, international joint ventures and technology licensing, Israel is promoting its green energy value on the global front. But equally important, Israel is now also making the push to safeguard that economy with an equally resilient green shield.

Israel: An emerging leader in clean technologies
 
Think of Israel as a product undergoing an overhaul to make it more competitive in the marketplace. What's called for are fewer stories explaining the rationale for the security fence, and more attention to scientists doing stem-cell research on the cutting edge or the young computer experts who gave the world Instant Messaging.

That's an oversimplification of what is taking place, but in an effort to improve the Jewish state's image in America, the Ministry of Foreign Affairs in Jerusalem and Israeli officials in New York are working with a team of local business experts to de-emphasize the focus on Israel at war and promote the concept of a country whose medical, scientific and technological achievements bring value to Americans.

The campaign, called Brand Israel, is a strategic marketing effort formed more than a year ago but not made public until now, with seven business and research experts volunteering their expertise on behalf of the foreign ministry. It comes at a time when the foreign ministry, the perennial punching bag for critics of Israel's hasbara, or public relations, is under renewed scrutiny as the result of a highly rated reality series on Israeli TV, 'The Ambassadors.'

JEWISH WEEK: Marketing a new image | Opinion
 
Investor's Business Daily: How Free Israel Prospers As Islam Remains In The Dark
Israel, a New Jersey-sized nation of 7.5 million people (1.7 million of whom are Arab) filed 7,082 international patents in the five years ending in 2007. By contrast, 28 majority-Muslim nations with almost 1.2 billion people — 155 times the population of Israel — were granted 2,071 patents in the same period. Narrowing the comparison to the 17 Muslim nations of the Middle East from Morocco to Iran and down the Arabian Peninsula, the 409 million people in that region generated 680 patents in five years.
This means that the Arab and Iranian world produced about one patent per year for every 3 million people, compared with Israel's output of one annual patent for every 5,295 people, an Israeli rate some 568 times that of Israel's neighbors and sometime enemies.

The awarding of Nobel Prizes in the quantitative areas of chemistry, economics and physics shows a similar disparity, with five Israeli winners compared with one French Algerian (a Jew who earned the prize for work done in France) and an Egyptian-American (for work done at Caltech in California).

But wealth isn't the sole explanation for this disparity in intellectual innovation. Saudi Arabia enjoyed a per capita income of $24,200 in 2010. Yet the Kingdom averages an anemic 37 patents per year compared with Israel's 1,416 per year — and there are 3 1/2 times more Saudis than Israelis, meaning that Israel's per capita output of intellectual property is 132 times greater than Saudi Arabia's.

The telltale signs of Israel's economic rise can be seen in the Tel Aviv skyline and the new office complexes around Jerusalem. International giant Teva Pharmaceutical Industries Ltd. was founded in 1901 by three pharmacists in Jerusalem. Today it employs 40,000 around the world. Teva has a market cap of $44.2 billion — the most highly valued company based in Israel and the ninth-largest firm traded on the Nasdaq

A few miles from Teva's gleaming office campus west of the Old City sits the former national mint building for the British Mandate. Built in 1937, this renovated building, along with the old Ottoman Empire railway warehouses next to it, houses the JVP Media Quarter and 300 entrepreneurs.

The complex hosts Israel's leading venture capital firm, Jerusalem Venture Partners, as well as 35 startups and a performing arts center for good measure. JVP, which has helped launch 70 companies since 1993, has more than $820 million under management with seven active venture capital funds.

The Media Quarter concept was created in 2002 when JVP founder Erel Margalit wanted to create a media-focused incubator that combined technology, culture, art and business. JVP has shepherded 18 initial public offerings, mergers and acquisitions, including some of the largest Israel-based companies: Qlik Technologies, Netro Corp., Chromatis Networks, Precise Software, Cogent Communications.

Less than 300 miles separate the purposeful creative buzz in the JVP Media Quarter from the restive streets of Cairo, where the Muslim Brotherhood tells Egypt's unemployed that their plight is the fault of corrupt capitalists and Jews. It doesn't take a Nobel Prize-winning economist to figure out where these two economies are going.

How Free Israel Prospers As Islam Remains In Dark - Investors.com
 
"Brand Israel" is an Israeli propaganda campaign.

Stoner has the book and pasts from it constantly.
 
Bill Gates...
"It's no exaggeration to say that the kind of innovation going on in Israel is critical to the future of the technology business . . . For Microsoft, having an R&D center in Israel has been a great experience . . . The quality of people here is fantastic."

1996-Microsoft acquired Israeli Panorama, an innovator of business intelligence solutions
 
Bill Gates...
It's no exaggeration to say that the kind of innovation going on in Israel is critical to the future of the technology business . . . For Microsoft, having an R&D center in Israel has been a great experience . . . The quality of people here is fantastic.

1998-Microsoft makes its first venture capital activity in Israel by investing in the Orion Israel Fund l – part of the international AIG Global Investment Group
 
What makes that plot of land so amenable to research :eusa_eh: They could just as easily do the research in say Madagascar.
 
Bill Gates...
It's no exaggeration to say that the kind of innovation going on in Israel is critical to the future of the technology business . . . For Microsoft, having an R&D center in Israel has been a great experience . . . The quality of people here is fantastic.

2000-Microsoft acquired Israeli WebAppoint
 

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