Israel 5th in Bloomberg tech ranking, ahead of US, UK

The country needs a billion-dollar ‘tech unicorn’ to break through to the top, say experts

Mellanox headquarters in Yokne'am (Moshe Shai/Flash90)
Mellanox headquarters in Yokne'am (Moshe Shai/Flash90)

Israel has been ranked number five overall on this year’s Bloomberg Innovation Index, an annual ranking of countries that measures performance in research and development, tech education, patents, and other marks of technology prowess. Fifth place marked a dramatic rise from last year’s 30th.

Israel did especially well in the R&D category, with the country ranking second in GDP expenditure on research, as well as on the percentage of the labor force with advanced degrees and the number of research professionals per million population. Israel ranked fourth overall in both those categories.

The study measured country rankings in six areas: R&D, manufacturing, the number of high-tech companies located in each country (the total number, not adjusted for population size), the number of students enrolled in post-secondary education programs, the number of PhDs working in R&D, and the number of patents per capita.

With its fifth place overall ranking, Israel bested France, Singapore, and the UK, as well as the US, which came in sixth overall. Taking the number one spot in overall innovation, as well as in R&D and education, was South Korea, followed by Japan, Germany, and Finland. China, recently touted by some as posing an R&D challenge to Israel, came in 18th in that category, and 23rd overall. India, another supposed challenger, did not make the top fifty in any of the metrics.

Israel’s overall rank was a strong improvement over last year’s Bloomberg ranking, which lists the top 50 countries for innovation. In that ranking, Israel placed a dismal 30th. In those rankings, Israel did well in education and R&D, but not as well in patents – ranking only 28th.

The real point-loser for Israel last year was in manufacturing capability. R&D doesn’t necessarily translate directly into product manufacturing, especially in Israel, the 2014 index said; the actual production and sale of an app or a physical product is often done from abroad, and as a result Israel ranked only 60th in this area.

In the 2015 index, Israel’s ranking in manufacturing improved significantly, with the country coming in 21st. However, there was a slight drop in the rankings for patents, with Israel falling to 31st.

Topping the list in three of the six categories – R&D, patents, and education – was South Korea, and those achievements, the Bloomberg report said, could largely be attributed to one important factor – the presence of electronics giant Samsung, which has been an engine of education and innovation in the economy. “In South Korea, research-intensive companies, led by Samsung, have modernized the whole economy.” South Korea, the report said, “is proof that countries can lift themselves up by their bootstraps through a combination of government support and private enterprise.”

While Israel has several large companies – such as pharma company Teva and microprocessor maker Mellanox – it does not have a world tech leader of the caliber of Samsung that could put Israel at what experts say is Israel’s rightful place at the top of the rankings.

Alan Weinkrantz (Photo credit: Courtesy)
Alan Weinkrantz (Photo credit: Courtesy)

Israel indeed does not have a tech leader, according to industry expert Alan Weinkrantz – it has a whole slew of them, and the work being done at Intel, Microsoft, Cisco, and the many other multinationals that have significant R&D operations in Israel will, he believes, eventually pay off for an Israeli “unicorn” – the term used for a home-grown billion-dollar tech giant. “Many of the people I have met in the big companies are working on their own side projects, using their skills and knowledge to build what they hope is the next big thing.”

As the Brand Ambassador for US tech giant RackSpace in Israel, Weinkrantz has had an opportunity to meet many entrepreneurs – both full-time and part-time – and at one point, one of the R&D ideas these entrepreneurs come up with is going to turn into an Israeli unicorn. “This is one of the unintentional benefits of the choice multinationals have made to make Israel one of the world’s top R&D centers,” said Weinkrantz.

“I recently heard Jon Medved of Our Crowd say that within a decade a major consumer brand will come out of Israel – much bigger and more all-encompassing than the big companies we have here,” Weinkrantz added. “The entrepreneurs who are capable of doing this know Israel and are much more likely to stay and build their business here – and when that happens, Israel will indeed take its place as one of the leaders not only of R&D, but of the tech business overall.”

Most Popular
read more: