Yehoshua Gleitman - National Policy for Innovation: Israel Approach

National Policy of Innovation

National Policyfor Innovation

Dr. Yehoshua (Shuki) GleitmanPrague 4/2015


Presentation Intakes

• Innovation Ecosystem• National Policy for Innovation Approach, Principles• Key Instruments• Some Cases


Innovation Critical Success Factor

Important and Sustainable “Tool” of Nations for: Job creation, GDP Growth

• Improve Productivity and Competence• Best Position in the World Competition• The Factor Behind the Success of Singapore, Finland, Chile, Israel and US!


“If you don’t get better, you get worse”(My Mom)


…. So how can we generate innovation? Or, at least, influence its creation?


Why focusing on Innovation Ecosystems?

The linear model of innovation is dead!


Who are the Innovation Ecosystems’ principle actors?

• There are many essential ingredients or elements of innovation ecosystem

• The triple Helix: Government – Industry – Academia. In addition to fulfilling their traditional functions, each institutional sphere also “takes the role of the other”

Government

Industry Academia


Government


• Efficient Way of “Job Creation”• High Return on The Investment• Building Modern Flexible Economy• Market Failure• Best way to establish National Advantage• Effective Spillover • Looks Good

Why spend tax payers money to support innovation?


Government Role

infrastructure

• Technology: education, basic/applied R&D• Financial: direct involvement, investment tools

• Business: ease of doing business

• Balanced Systems

• Risk Mitigation


risk

investment


Location of value added in the value chain

Source: Gary Gereffi, presentation at OECD workshop, September 2010.


Key Instruments

• First Step Support – Accelerators Incubation Centers

• Matching Grants, Mini Grants• Academic / Business Cooperation• Financial Instruments• International Cooperation


Some Issues

• Targeting / Neutrality• Intellectual Property• Level of Support• Government Equity • Large / SME• Ownership – local / foreign • IPO/Sell of the company out of country• National Agenda - less developed zones - minority groups


Practi cal Issues

• Due Diligence• Attitude• Time To Decision• Schedule of Payment• Royalties Payments/Loans/Tax Exemption• Reporting System• Impact Evaluation


The innovation ecosystem is complex

EntrepreneursResearchers

financing

Research Facilities

High skilled workers

IP Protection Laws

Industry


Government plays a key role in optimizing the ecosystem

Infrastructure Risk sharingSocial goals


Government should enable and nurture

• Actively encourage constant development of the ecosystem

• Provide conditions for continuous growth of companies

• Regulate and guard the “rules of the game”

• But! It is not the government’s role to replace the private sector or to predict the “next big thing”


Even the brightest minds failed to predict the future

“We do not have need of the futureelephone. We have

plenty of messenger boys." -- Sir William Preece , Chief engineer,

British Post Office

"There is no reason anyone would want a computer in

their home.” -- Ken Olson, president, chairman and

founder of Digital Equipment Corp. (DEC)

"No one will need more than 637KB of memory for a personal computer."

–(attributed to) Bill Gates


Even the best technology companies failed to understand their areas of activity

IBMcomputers

NOKIAcellular

MOTOROLAcellular


Israel’s Approach

• Support System for All Innovation Stages:• Entrepreneur Level• Incubation • Growth stage • Generic pre competition

• Private Sector Financial Tools• International Cooperation


Generic R&D

Magnet

Magneton

Competitive R&D

IndustrialR&D

Nati

o na l

Pre-Seed

Tnufa

Nofar

TechnologicalIncubators

Cooperative R&D

Long-Range R&D

Seed Fund

Applied Academic Research Basic R&D Market Proximity

EUREKA

Bi-national Funds

ISERD(Europe FP)

Inte

rnati

onal

Global Enterprises R&D Cooperation

Bi-national Agreements

Galileo

OCS Government Support Programs


Israel is a global leader in research and innovation

Level of innovation

Qua

lity

of S

cien

tific

Rese

arch

Source: World economic forum, 2011

Israel


Israel is…• 1st in the world for scientific

research• 1st in the world for

entrepreneurship• 1st in the world for information

technology skills• 1st in the world for expenditure on

R&D (as % of GDP) • 2nd in the world for innovative

capacity• 2nd in the world for venture capital

IMD World Report 2011The Global Competitiveness Report 2010-2011 (World Economic Forum)

VC Investment, $ per capita


19751978

19791981

19831985

19871989

19911993

19951997

19992001

20032005

20072009

0

5

10

15

20

25

30

35

40

Billi

ons U

SD

Indu

stri

al E

xpor

ts

But this was not always the case

~25 B$ 10% of current

GDP

This change was led by the hi-tech sector


Jaffa Oranges vs. Software

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20030

500

1000

1500

2000

2500

3000

3500

Citrus Software

Source: Dept. Economic & Planning Admin., Ministry Industry, Trade and Labor, State of Israel

Exports ($ millions)


Integrated Model – Total Returns to the Economy

Return OnGov. Money

TotalValue Added

Increment to the Economy

SpilloverEffect

DerivedOwnEffect

TechnologicalIntensity

473%28.617.710.9Hi-Tech751%42.625.317.3Mid-High Tech1323%71.232.838.4Mid-Low Tech828%46.47.339.1Low-Tech


Israel’s advantages

• Human Capital• Scientific Base • Excellence in - IT, Life science • Government Support• Disruptive Perception• Supportive Environment National DNA


Achievements

• High Tech - 35%+ of the Industrial Export• Start Up nation• 5X Direct Return on the Government Investment (5-7 years)• Major Tool of Job Creation• Substantial Additionality and Spill Over


Israel’s weak points

• Financial - VC major investment tool, No Equity Funds, Institutional Investors are out of the game

• Weak transition from Start Ups to Mature companies

• Academic Infrastructure• Technology Absorption


Serbia Case

• IF start operation 2011• Operational Budget – over 1M euro• Support Budget – 6M euro• Two operational Programs – Mini Grants - Matching Grants• IF Organs – Management, IC, Board, DD org.


Serbia Case (2)

• 100+ Applications at Last Call • Capacity Building• Positive Public Attitude

• Government Commitment• Future Budget• Fund Governance

Achievements

To be Corrected

Very Impressive Outcome


Serbia Case (3)

The agency was on hold for 5 months

Due to election and change of power – Late approval of Operational budget


Key Success Factors

• Education• Basic Science Infrastructure• National “DNA”• High In National Priorities• Well Balanced System• Execution !!!!!!!• Long Term Commitment


THANK YOU

Dr. Shuki Gleitman


R&D Centers In Israel

Maps: Wikipedia

Haifa Region

Tel Aviv Region Jerusalem Region

Southern Region

Northern Region

Over 240 foreign companies have established R&D centers in Israel Over 50,000 personnel are employed in these R&D centers in Israel


What were the most important Bottlenecks for self discovering new exports activities?

What type of government intervention?

Horizontal Vertical• IP Protection• Bankrupsy

Laws• Contract• Enforcements • Ease of doing Business

• Sanitary Protection for fruit and meet sector

• Matching grants

• Tax Credit on R&D

• Subsidies on Training

• Proof of Concept

Labs For Specific Technology/sect• Technology Consortium in a sector/technology

Public or semi Public goods

StrongIntervention

AppropriationFailures Lead toHorizontal Interventions

Coordination Failures lead to Vertical Interventions


VC’s in Israel:from traditional banking to VC industry

1992

• The Israeli government understands that well-functioning venture capital markets are the key sources of finance for many innovative start-ups and therefore need to be developed

• 1 VC


Yozma (Initiative in Hebrew)

1993

• A governmental initiated program “Yozma” was established to encourage venture capital in Israel

• Began operation in 1993, privatized in

1997


The outcome

“The solid availability of venture capital has further contributed to making Israel an innovation powerhouse” The Global Competitiveness Report 2011-2012 - World Economic Forum