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Israel stands out on a number of innovation
indicators. At 4.65% of GDP it has the
world’s highest R&D intensity, over twice
the OECD average of 2.26%. The intensity of
business R&D expenditure is also higher
than in all OECD countries, at 3.64% of GDP
in 2006. Israel has the fifth highest number
of scientific articles per million population,
after Switzerland, Sweden, Denmark and
Finland. It is also among the leaders in the
number of triadic patent families per
capita; however, in absolute terms it
accounts for less than 1% of all triadic
patent families, on a par with Australia and
Belgium. In addition, Israel has a strong
information and communication technology
sector which accounts for about 20% of
total industrial output, 9% of business
sector employment, and a large share of
the output growth of Israeli industry.
Israel’s innovation system is a key
driver of economic growth and competitiveness.
While the success of the Israeli system
is primarily attributable to vibrant business
sector innovation and a strong entrepreneurial
culture, the government has also
played an instrumental role in financing
innovation, especially in SMEs, and in providing
well-functioning framework conditions
for innovation, including venture
capital (VC), incubators, strong scienceindustry
links, and quality university education.
For example, Israel reportedly has
around 70 active VC funds, which raised
EUR 963 million in 2005 and EUR 437 million
in 2006. It has 24 technology incubators,
16 of which are privately owned.
The available indicators on human
resources for S&T show no shortages. The
tertiary education attainment ratio is the
third highest worldwide, behind only
Russia and Canada, and the share of graduates
in science and engineering, at 24.3%, is
at a level commonly observed in advanced
OECD countries.
Yet, Israel also faces some challenges.
The strong reliance on the high-technology
sector provides a narrow base for economic
growth. Promoting innovation by SMEs and
in non-high-technology industrial and
services sectors is particularly important.
Maintaining efficiency in R&D expenditure
is another challenge. With high R&D
intensity, it is important to ensure that
project selection remains rigorous, with a
focus on net economic benefits. The Office
of the Chief Scientist, the main government
agency to support R&D (with a budget of
EUR 223 million in 2006 and EUR 219 million
in 2007), has funded one out of five project
proposals in recent years. A further challenge
is how to identify and invest in future
technologies, including biotechnology and
nanotechnology, that have strong potential.
Recent government initiatives include
the amendment in 2005 of the law on R&D
to allow overseas transfers of know-how
resulting from publicly funded research, the
establishment of several new programmes
for SMEs and traditional industries, as well as
the creation of a EUR 21 million fund for
nanotechnology and a EUR 25 million fund
for biotechnology. A new programme for
the development and commercialisation of
water technologies was introduced, and
additional instruments for the water and
renewable energy fields are being developed.
Israel has also signed R&D co-operation
agreements with innovative regions in
foreign countries and major multinational
companies; these will help it to build
stronger links with innovation partners.
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