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