Israeli Business in Transition

Despite the burden of an enormous defense budget, the absorption ofimmigrants, its tiny size and the scarcity of natural resources, Israel’s economy,albeit with considerable financial aid from abroad, was able to achieveimpressive growth rates. This was to a great degree accomplished by putting aheavy emphasis on education and by rapidly achieving a high degree ofindustrialization through government policies and incentives. But in recentyears, with increasing government deregulation and enormously altered globalpower structures Israel is faced with a dynamic new reality. Israel's ability tocontinue or even heighten its growth rate will be very much dependent on theability of the individual businesses to adapt and adjust rapidly to these newrealities. This study of organizational learning in Israel was undertaken in orderto understand what factors and mechanisms are involved in Israeli companies'ability or lack thereof to successfully cope with the challenges of this rapidlychanging environment. Top executives representing more than 55% of thecompanies employing 500 workers or more, were interviewed.Two distinct patterns of learning, related to three basic elements, emerged fromthe data. These elements are the image of the individual employee, theorganizational and decision-making structure of the company, and the specificcorporate culture.Of particular interest in Israel is the significant number of companies whichexhibit mixed features of these two learning patterns. In these “hybrid“companies, which tend to have a history of centralized learning characteristics,there is a growing interest in the flexibility commonly associated withdecentralization and the flattening of hierarchical pyramids of decision-making.The study also discusses factors that promote or hinder organizational learningsuch as crises and success.