Diffusion of Academic R&D Capabilities as an Industrial Innovation Policy? - the Development of Israel's it Industry

In the last decade, three countries have figured prominently as cases of late-late developing countries that achieved worldwide success with their Information Technology (IT) industries: India, Ireland, and Israel. This paper focuses on the Israeli case and argues that unlike India and Ireland, Israel's competitive advantage in the IT industries, is in Research and Development (R&D). The paper's main arguments are that (a) the declared aim of Israel's industrial policy has been to develop exactly such a system of innovation we see in Israel today; (b) however, these policies, focused on diffusion and not on creation of capabilities, were successful only because of the existence of an already sophisticated and extensive R&D capability in the universities - markedly different from other NICs. Looking at the present the paper concludes that the same operational model that led Israel's IT industry to success might now be undermining its future growth