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Innovation-Based Industrial Policy in Emerging Economies? The Case of Israel's IT Industry

Published online by Cambridge University Press:  20 January 2017

Dan Breznitz
Dan Breznitz*
Affiliation:
Sam Nunn School of International Affairs and the School of Public Policy, Georgia Institute of Technology
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Abstract

In the last decade, few countries have figured prominently as cases of late-late developers that achieved worldwide success with their Information Technology (IT) industries. This paper focuses on the Israeli case and argues that uniquely in that group, and in contradiction to the model proposed by late development theories, 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 a “science-based” industrial system similar to what 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 Newly Industrialized Countries. 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.

Keywords

industrial transformation and developmentlate developmentinnovative capabilities' diffusionsystems of innovationinformation technologiesscience and technology policies
Type
Article
Information
Business and Politics , Volume 8 , Issue 3 , December 2006 , pp. 1 - 35
Copyright
Copyright © V.K. Aggarwal 2006 and published under exclusive license to Cambridge University Press 

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