Public Policy, Locational Choice and the Innovation Capability of High-rech Firms: a Comparison between Israel and Ireland

Marked differences exist in the industrial and regional policy regimes adopted in Israel and Ireland. This paper reviews these differences and investigates their influence on the development of the high-tech sector in each area. Using survey data from Irish and Israeli firms we examine the influence of public policy on the characteristics, location and innovation capability of high-tech firms. Important differences are observed between the characteristics and market orientation of high-tech firms in the two areas. These are consistent with the orientation of each area’s industrial policy regime. Reflecting these differences, the innovation activities of Israeli firms are found be much more locationally sensitive than that of Irish companies. Regional policy incentives, involving the dispersal of high-tech activity to more peripheral areas on the island of Ireland are therefore likely to have had little negative effect on firms’ innovation activities. In Israel, however, inducing highly R&D intensive firms to locate away from the main metropolitan areas may be counter-productive without balancing developments in higher education etc.