The high-tech industry that has come to play such a central role in the progression of the Israeli economy must first be defined. A high-tech business can broadly be defined as one that relies quite heavily on innovation in science and technology. Chorev and Anderson say:

“The characteristics of high-tech include; they invest more heavily in R&D activities than the national average; employ a higher percentage of engineers and scientists among their staff; offer innovative and technologically advanced products; are dynamic in nature and have short product development cycles” 

Israel’s proficiency in the advanced technology sector has served to establish the nation as being at the forefront of global technological development. The roots for the boom that stimulated advances of the technological sector in Israel can be found in the 1980s, where incipient strategy in economic management saw largely publicly and state-owned enterprises operate around severe trade restrictions and the solidity brought by strong trade unions, representing a corporatist approach. The “dot-com bubble”, also known as the information technology bubble, that occurred between 1997 and 2000 represented an exciting upturn for the Israeli economy, which profited greatly thanks to its high-tech culture. However, Israel is vulnerable to changes in the world economy because of its heavily globalised and export-based system. Israel is also potentially vulnerable to sanctions and boycotts, which would dampen the high-tech industry’s ability to be a driver for development.

The human capital that Israel possesses, combined with its geographically isolated position in relation to similar markets, means that high-tech ventures are seen as a crucial element of the economy. Illustrating the significance in growth that the high-tech sector has brought to Israel are figures demonstrating an extraordinary rise in industrial production share from 37% in 1965 to 70% in 2006.

The stimulation of the advanced technology industry by the government in its early stages through loans for start-ups and the like is being repaid handsomely by collecting dividends on shares and is subsequently helping to encourage growth in today’s market.

In short, Israeli innovation and a high-skilled workforce have put the country at the forefront of technological development. With roots in the 1980s at a time of liberalisation, privatisation, and the encouragement of entrepreneurship, Israel’s industrial production share has since nearly doubled. Whilst the industry is economically vulnerable to world events, it is a key use of Israel’s human capital and is certainly a driver of Israel’s economic development.

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