The 2011/05/02 at 10:23
With its palm trees, its breathtaking view of the Mediterranean, and its thirty-something population, the Matam, constructed at the foot of Mount Carmel looks like a holiday resort. And yet it is in fact the largest technological park in Israel, at the entrance of Haifa, symbolising Israel’s shift to become the ‘Silicon Valley’ of the Middle East. It is here that big names in global IT, from Google to Microsoft, via Intel, have opened up R&D centres. This is where the gems of Israeli cutting-edge industries can be found, such as Elbit Systems (Defence), or else start-ups from the incubator of Technion, the local MIT. At this point in time, Israel is one of the biggest investors in civilian R&D, placing almost 5 % of its GDP in this sector. “One of the strengths of the Israeli model is its upstream support of radical ideas and technologies that no one believes in,” is a comment from the technological incubator Technion, the first to host a US technology fund (Battery Ventures).
How was this textbook case born? A researcher at the Georgia Institute of Technology, Dan Breznitz recalls that innovation became a catchword at the end of the 1960s, in the wake of the Six Day War and the military embargo decreed by France. “Tel Aviv’s reaction consisted in mobilising R&D and capital in the hope of developing its own military technology to face its enemies,” explains Breznitz in his work dedicated to innovation policies in Israel, Taiwan and Ireland (1). It was also during this period that the Chief Scientist position was created within the Ministry of Industry and Trade, in order to develop civilian research. The organism would gradually be endowed with a battery of tools meant to inspire researchers with the spirit of enterprise (incubator programme), to inspire generic technologies in a consortium context (Magnet) or to promote a local risk capital industry (Yozma).
24 technological incubators
Since 1991, the arrival of over 1 million Russian immigrants, mainly trained engineers, pushed public authorities to set up a national system of 24 technological incubators. “The formula existed in the United States, but modifications were introduced: the Jewish State took the risk of investing in the initial stage, at the proof of concept stage, in order to obtain the best of innovation,” points out Rina Pridor, instigator of the Technological Incubators Programme that she supervised until the end of 2008. The programme has spawned projects that are now in the pipeline of risk capital players… For a decade now, all incubators have been privatised, namely via the IPO of mother companies, while one-third of incubated projects come from university technological transfer companies. Israeli innovation has also benefited from the US market. Taking into account the tightness of the market, the high-tech sector has had to back competitive projects on the international scale.
In this context, a partnership with the United States has proven essential. Born 32 years ago, the Bird bi-national programme has supported over 800 projects whose R&D has been located in Israel and sales, in the States… This leaning towards the USA is one of the limits of the Israeli system. “This economy largely relies on start-ups, that tend to be bought out by US groups, or else be relocated on the other side of the Atlantic,” notes the academic Dan Breznitz. In such a way that the benefits of innovation do not always remain in Israel. “The Israeli ecosystem hardly favours the transformation of start-ups into big companies,” admits Eugene Kandel, in charge of the National Economic Council (read interview). “But it is not necessarily in the interests of the country to depend on a mega-group of the likes of Nokia.” Israeli high-tech guru Yossi Vardi also sees this phenomenon in a positive light.
“There is a cross fertilisation of Israeli young bucks and the multinationals that bring their marketing and financial striking force,” confides this serial entrepreneur. Last but not least is the driving role of the army. Elite technological units in Tsahal are a breeding ground for local high tech, representing 35 % of the Israeli GDP and 10 % of the working population, while countless innovations draw inspiration from technologies initiated by the Defence industries. In the telecoms, expertise developed in the military and civilian sectors are very similar. In the medical industry, the best known example is that of the Given Imaging endoscopy capsule. Reimbursed by the French and German health systems, this product, known as the Pillcam, is adapted from a technology by the missile maker Rafael – a success story that Israeli authorities hope to multiply. The Chief Scientist and the Ministry of Defence thus plan to launch an investment fund aiming to “optimise the commercial potential of innovations from the civilian and military sectors”.
(1) Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan and Ireland. (Yale University Press, 2007)