FEATURE7 December 2017

The startup economy in Israel

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Changes to military R&D strategy and an influx of immigrants from the former Soviet Union have played a part in the rise of entrepreneurship in Israel. By Michael Kislev and Rani Chetrit.


Israel is known for its innovation these days. GPS navigation software Waze, a virtual colonoscopy camera, and the Babysense monitor are just some of the many inventions developed in Israel that have spread to the rest of the world. 

So what is the secret behind Israeli people being so innovative and creative? The answers are necessity and ability.

The seeds for the startup nation were planted in the late 1980s. In 1984, roughly 55-60% of the highly trained technology labour force was employed by the military sector, while only 10% worked in research and development (R&D) for the private sector. This hampered the ability of private industry to develop its own R&D infrastructure, which is much more profitable than that of the military. 

From 1987, Israel changed its military strategy, and gave up the quest for self-sufficiency in weaponry development. The country’s defence budget decreased significantly in the following years, from about 20-25% of gross ...