Israel As An Innovation Hub – Why?

Over the past decade there has been an influx of tech companies into Israel in search of innovation. This is done by purchasing a local company, becoming shareholders or partners, establishing a local subsidiary, opening a local branch, scouting technologies, collaborating with an academic institute, visiting and meeting with Israeli companies in exhibitions and shows.

Israel is a very small country, with a population of 9 million. By comparison, New York’s population is estimated at 8.5 million. Greater London’s population is estimated at 9.1 million and  Tokyo’s population is estimated at 13.9 million. Yet, Israel has become a renowned innovation hub, attracting many global players. Why? How? What makes it so innovative? Can innovation be taught? Developed? Must one be born with it?

Research shows that one must be born with some innovativeness to become innovative. Research also shows that it can be developed, trained, expanded. Like a muscle. But the relative ratio of startups to the general population in Israel – is exceptional compared to other countries. Yet, there are hardly any schools or universities in Israel that teach innovation as a subject. Some universities have “entrepreneurship programs”, from certificate studies to fully first or second academic degrees. Typically they will have one or two courses in their curriculum titled “innovation”, however these courses are available only to students pursuing a specific degree. In elementary, middle and high school – the official school curriculum does not include any “innovation studies”.

My opinion is that the reasons for the high Innovation ratio in Israel, compared to other countries, are:

  • Necessity/survival state of mind
  • Lack of natural resources
  • Israeli/Jewish culture
  • Parenting style

Necessity/survival State of Mind:

Israel was established in 1948, a few years after WW2, after the unbelievable magnitude of the holocaust was realized: one third of the entire Jewish population in the world was killed. The day following the declaration of Independence, all neighboring countries have invaded Israel and the young country found itself at war with all of its neighbors. The odds were really slim – the entire Jewish population amounted to 600,000 people, there was no army, ammunition was scarce, with only a few outdated planes.  At the same time, immigrants escaping Europe were flooding into Israel. An entire nation became united around one idea – we have finally returned to our homeland after a 2,000 years exile, no one is pushing us out of here again, even though our back is against the wall, we must survive. Necessity, determination and the need to survive, fueled innovation and improvisation. Israel won its Independence War and every war since. Fast forward 71 years, in 2020, even though Israel is a force in the Middle East, the “survival operating system state of mind” is deeply embedded into the national restless DNA, supporting and celebrating innovation.

Lack of Natural Resources:

Unlike other countries, Israel has not been blessed with natural resources. As late as the beginning of the 21st century, abundant quantities of natural gas were discovered off shore, and the construction of a nation-wide high pressure transmission system for natural gas started only in 2004. Israel is located in the eastern basin of the Mediterranean, on the edges of deserts. Since its inception, it was clear that the country is not rich, and that the only resource available – are the minds of its people. The only assets would be intangible assets – through innovation. Combined with the “survival operating system”, large investments were made by the military and defense organizations in innovation and development of new technologies in various areas. In the 1980’s some of these technologies found their way into the civilian domain, high tech companies were formed, the Government established Yozma, the first local venture capital fund (that invested in funds and in companies), export sales of technological products brought a highly needed inflow of foreign currency, and the Israeli high tech industry was born.

Israeli/Jewish Culture:

Throughout the 2,000 years’ exile, it was vital for the Jewish people to retain national identity. This was achieved, among others, by continuing to learn the Bible and by teaching children to read and write. The teaching method consisted of reading, asking and answering questions, by memorizing the Bible, analyzing every word, verse and sentence, by searching and interpreting the hidden meaning of every word written in the Bible. Debating, analyzing, interpreting was (and still is) cherished and encouraged as part of effective learning, so nothing is forgotten. This became the natural way of thinking, and continued into modern Israel.

Additionally, in modern Israel, it is mandatory to serve in the army at the age of 18. The Israeli army is highly technology oriented. In both technological units and combat units alike, at 19 – 21 years of age, soldiers are given significant responsibility and are constantly required to take initiatives and find creative and innovative solutions. In technological units, this mindset combines with almost unlimited access to technological tools, resulting in a stable stream of innovation.

Parenting Style:

A visitor to Israel may get the impression that children are misbehaved, noisy, restless, sometimes impolite and even rude. Parenting style is permissive and tolerant. Partly because having children is crucial to a people with a collective “survival operating system” due to losing one third only 80 years ago, and partly because the culture encourages “natural & free” attitude – children are encouraged to ask questions, they are not expected to be overly disciplined, misbehavior is looked upon forgivingly, loudness is considered “liveliness”, a child is often told “speak up, don’t be shy”. Children are not reprimanded for questioning authority, and are encouraged to think independently. When such independent thinking is channeled and cultivated with the correct tools – the result is innovation.

Our next post will focus on the order of magnitude of Israel as an innovation hub.