• Q5 - In Israel, 82% of research takes the form of experimental development, compared to 64% in the Republic of Korea^[4], another country known for its high-tech exports. What explains this high proportion in Israel?

The high level of Israeli basic research and innovation promotes Israeli science-based industries, attracting local and foreign investors and multinational companies in ICTs in particular. In 2007, such businesses performed more than one-third of GERD and employed about 40% of the researchers in the business sector. The positive repercussion of this situation is the provision of high-level employment to Israeli R&D personnel and the general contribution to national employment and income. The negative repercussion is that Israel foregoes much of the benefit derived from the commercialization of intellectual property created by its scientists.

Most R&D resources in the Israeli business sector are concentrated in three sub-sectors: the software and R&D services sector, with most businesses offering R&D services being engaged in information and communication technologies (ICTs), and the electronics and communication industries. These three sub-sectors employ 39% of all personnel in the business sector. Other sectors to which R&D resources are directed are the biotechnology and pharmaceutical industries. Only a small fraction of R&D workers are employed in essentially traditional industries, such as textiles and plastics.

This extremely high concentration of R&D in ICTs in the business sector points to the high level of risk to which the Israeli economy exposes itself by placing all its eggs in one basket. It is also indicative of an unexploited potential for developing the economy through investment in R&D in other industries, despite the fact that it is well-known that investing in R&D yields an exceptionally high return at the level of the national economy.

• Q6 - How many multinational companies have set up R&D centres on Israeli soil and is the trend accelerating? Do any of them come from emerging economies like Brazil, China or India?

There are currently 20 global corporations benefitting from grants from the Office of the Chief Scientist (OCS) of the Ministry of Industry, Trade and Labor (MOITAL) under a programme in which the OCS initiates agreements with leading global companies and invites local start-ups to undertake joint R&D programmes with them. Among the 20 are Hewlett Packard, Intel, Microsoft, International Business Machines (IBM), General Electric, Renault/Nissan and Merck. Scores of additional global companies have established R&D centres in Israel unrelated to the MOITAL programme but there is no central registry of these initiatives. These include AMD, an innovator in semiconductor design, Carl Zeiss, CitiBank, McAfee, Motorola and Qualcomm. The trend appears to be consistently strong.

^[4]Data taken from UNESCO Science Report 2010

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