In the mid 1980s, the Israeli government froze wages, prices and any other financial mechanism it could find in order to conquer hyperinflation. Then, over the following three decades, the protected economy of the Holy Land moved from being based on agriculture, textiles and tariffs to a “start up” success”. 

There are those critics that argue that not enough large companies have emerged. Too many exits is the cry. And the new wealth has not been spread equally.

On the other hand, statistics reveal that “65% of Israeli start-ups actually make it past the elusive fifth year in  business“. And I would argue that even without more large companies, the start-up phenomenon has been an amazing success. New jobs in new sectors have been created. Investments have flown in, especially into the Tel Aviv Stock Market. Employment is holding up despite a global recession. Israel has been able to join the OECD.

One simple way to analyse Israel’s success in the new industries – telecomm, cleantech, nanotech etc – is to look at the number of patents applied for. Since the year 2000, Israelis have registered around 7,000 patents per year, significantly more than countries like Switzerland, Germany and the UK. To take one case study, IBM has the largest single number of patent registrations in the USA. Around 8% alone emerge out of its Haifa-based research lab.

All very praiseworthy, until you look at what is happening in Israeli universities. Yes, they live up to their reputation and turn out all sorts of wierd and wonderful ideas, which are converted into Intellectual Property (IP). For example, “40 per cent of all Israeli start-ups are incubated by Technion (University in Haifa)”.

However, it turns out that hundreds of patents are unlikely to be commercialised. According to a table in last Friday’s financial paper “Calcalist”, citing seven leading academic institutions, over 2,100 patents have not found a commercial developer after twelve months. Most of these belong to the Weizman Institute, the Technion and the Universities of Tel Aviv and in Jerusalem.

It would be an interesting economics paper that would calculate the potential loss to the economy of this non-corporate activity. That said, I think it is fair to assume that the size of the forfeit can be described as significant! Daft, at the very least.

There again, a few weeks ago, the Israeli government pulled the plug on the heart of its mentoring programme for small businesses, which these patents are often part of. From the good to the sad to the stupid.