Israel as a Knowledge Economy I

Abstract

Israel has created a knowledge economy centered on high-tech start-ups almost to the exclusion of anything else. Given the extraordinary defense and political pressures that Israel has faced in the 25 years since the high-tech industry came into its own, this is an extraordinary achievement. While has Israel suffered multiple wars and political gyrations, societal values favoring a start-up culture outweighed them. Nevertheless, that achievement has been marred by failures, among them the inability to leverage its innovative capacities into big, sustainable companies; a parallel economy of inefficient and globally uncompetitive companies; and rising poverty and inequality. High tech has failed to deliver benefits to the wider Israeli economy. Israel’s experience should be instructive to other small economies that aspire to a high-tech industry.