The denizens of the Start-Up Nation fancy themselves an innovative bunch, but as far as Bloomberg research is concerned, Israel is an also-ran when it comes to innovation. In its latest Global Innovation Quotient report, Israel comes in at number 30 on a list of 200 surveyed countries.
The Quotient, which Bloomberg gives out annually, measures seven factors to determine which country is the most “innovative,” giving out scores for R&D, education, patent activity, and more. Bloomberg uses World Bank, World Intellectual Property Organization, Conference Board, OECD and UNESCO data to assign Quotient rankings.
But like any ranking, the overall summary number doesn’t tell the whole story. When it comes to R&D “intensity” — research and development as a percentage of GDP — Israel tops the list, beating out other R&D intensive countries, such as Finland, South Korea, Sweden and Japan. The United States, which came in third overall as most innovative, is tenth in this category.
The U.S. and Israel switch places in “high-tech density ranking,” with America coming in first in the percentage of high-tech public companies as percentage of publicly listed companies, and Israel in tenth place. Considering how many Israeli tech company exits involve buyouts by multinationals, it’s perhaps surprising that Israel ranks so high for this parameter, ahead of Singapore, France, the Netherlands, and the UK, all of which were ahead of Israel in the overall rankings (7, 11, 15, and 16 respectively).
Israel also excels in education, coming in seventh overall for the number of students relative to population receiving tertiary (PhD) degrees.
Israel did not fare as well in patent activity, defined by Bloomberg as how many patents are filed per million of the population, and per million dollars of R&D expenditures. For this ranking, Israel came in only 28th, a seeming anomaly, considering the intensive R&D that goes on here. The anomaly could be explained, Bloomberg said, by the fact that many Israeli companies seek patents in the U.S. and Europe via subsidiaries abroad.
It’s in productivity — defined for the study as GDP per employed individual, per work hour — that Israel, where hourly wages are not particularly high, begins to falter. Accounting for 20% of the overall Quotient, Israel’s 25th place in this parameter places it in the same neighborhood as Spain, Iceland, and Greece (23, 24, 26, and 27), none ranking particularly high in the overall rankings (32, 33, and 35).
But the real point-loser for Israel is in manufacturing capability — products with high R&D intensity as a percentage of manufactured exports. R&D doesn’t necessarily translate directly into products for Israel; the actual production and sale of an app or a physical product is often done from abroad, from offices in the U.S. As a result Israel ranks only 60th in this area.
The study seems to indicate that many Israeli tech workers get their education and do much of the research and development at home – only to go abroad for the “follow through” of an exit, IPO, or product introduction, a finding that is borne out by another key statistic, the U.S. “Brain Gain” index. In a study of how many skilled immigrants come from abroad to the U.S. on H-1B visas, Israel ranked as 21st out of 22 countries surveyed, meaning that far fewer skilled Israeli workers end up in the U.S. than do workers from India, China, and Canada (1, 2, and 3) on this list. Which is to be expected, of course, considering Israel’s relatively miniscule population.
But the real story is in another statistic supplied by Bloomberg: As a percentage of available manpower – the number of tech workers and academicians eligible for the H-1B visa program, which requires those seeking a U.S. work permit to have high-level tech skills – far more Israelis apply for the visas and are granted them than for almost any other country.
The percentage of H-1B visas going to Israelis between 2009 and 2011 was 0.47%, for a total of 1,058 of all the 200,000 or so permits granted – roughly the same number of visas that were granted to workers from Spain, Argentina, and Italy, all countries with far larger populations than Israelis. Israelis also rank second in terms of the percentage of eligible workers in a country’s population who apply for these visas.
Thus, as a percentage of those with the training to do so, a lot more Israeli academics and high-tech workers end up working in the U.S. than do researchers from other countries, and the loss of those workers is felt more acutely in Israel, which has fewer researchers to spare than other countries do. And the statistics supplied by Bloomberg only discuss the flight of Israeli tech experts to the U.S., not taking into account Europe, another major destination for local researchers and academicians.
That’s what people in the education business call “brain drain,” and in a recent interview, Hebrew University President Professor Menachem Ben Sasson said that Israelis shouldn’t be surprised that their best and brightest are going abroad. “For decades, the country has neglected to upgrade and expand research facilities and budgets that scientists need to get their work done. Our universities would love it if their graduates came back home to continue their work, but that requires investment,” he said, and the government has not seen fit to provide the money needed.
“The only way to bring back top Israeli workers – and keep the results of Israel’s R&D in Israel – is to “invest in infrastructure, in equipment, and in opportunities,” Ben Sasson added. “Once we do that, they will come back.”
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