In less than 30 years, Israel has transformed itself into a high-tech industrial nation with a per capita income of some $35,300. Silicon Wadi, a 125-mile corridor stretching from the plains around the northern port of Haifa to the Negev Desert in the south, has spawned more high-tech start-ups than all of Europe. Only the U.S. claims more high-tech start-ups, and it has a population nearly 40 times larger than tiny Israel’s 8.2 million.
Due to continuous government push on R&D, Israeli companies have grown out to be exceptionally strong at innovations in their products or services. The high tech industry in Israel has invited a rise in foreign direct investment from foreign venture capital firms to finance hot new start-ups. The nation is second largest exporter of military drones and cyber security. Israeli R&D account for half of nation’s job (290,000)
“Underpinning this high-tech boom is a uniquely Israeli ecosystem that links elite military units, hundreds of start-up companies, and a multilayered investment community.”
The government support comes from funding to set-up accelerators or incubators. Government awards special grants to collaborations. The main source of specific ICT knowledge has traditionally been the military, along with government owned and independent military technology firms. Military research in Israel is acknowledged in certain areas such as communication, network, data security. Offshoots from these progress led to world-class firms emanating from Israel.
Government’s investment in research at University level. Adi Shamir (S of RSA) of Weizmann University helped make the ground breaking RSA algorithm.
Government offers incentives to firms in form of tax rebate and funding R&D to locate their high-tech facility in Israel. Government tax is 36% however there is reduction in corporate tax by 10% for 7 years for industries performing R&D and production in Israel.
Israel US Bi-national Industrial Research and Development Foundation (BIRD) contributes upto 50% of cost of joint research. It may be noted that there are many such government arrangements with other governments to fund Research and Development such as KORIL (with Korea), SIIRD (with Singapore) etc.
Emergence of venture capital Infrastructure: Government encouraged establishment of venture capital fund by providing 40% of funding with easy purchase clauses for investor whether domestic or foreign.