The Development of the Information Technology Industry in Israel: A Case of State-Induced Expansion of Academic R&D Capabilities Throughout the National Innovation System?

In the last decade, three countries have figured prominently as cases of late-late developing countries that achieved worldwide success with their Information Technology (IT) industries: India, Ireland, and Israel. This paper focuses on the Israeli case and argues that unlike India and Ireland, Israel’s competitive advantage in the IT industries, is in Research and Development (R&D). This competitive advantage in R&D exists in all IT industrial sectors and in life sciences and propelled the Israeli high-technology industry to success first in hardware and then in software. The main argument of this paper is that this R&D advantage, historically emanating from Israel’s academic research institutional complex, is apparent throughout the Israeli system of innovation and in all stages of technological research. More importantly, the paper contends that since in the late 1960s, the declared aim of Israel’s industrial policy has been to develop exactly such a system, and to diffuse these capabilities throughout the industrial sector. Hence, the Israeli innovation system, while not directly built by these state efforts, was nonetheless, greatly assisted in its development by the state.