Dan Senor, co-author of the recent (and highly recommended) book, "Start-Up Nation: The Story of Israel's Economic Miracle" really captures the essence of what makes Israel worth paying attention to in this November 2009 article in Newsweek.
How does Israel—with fewer people than the state of New Jersey, no natural resources, and hostile nations all around—produce more tech companies listed on the NASDAQ than all of Europe, Japan, South Korea, India, and China combined? How does Israel attract, per person, 30 times as much venture capital as Europe and more than twice the flow to American companies? How does it produce, for its size, the most cutting-edge technology start-ups in the world?
David Brooks in the New York Times gives some more reasons to study the Israeli model.
Because of the strength of [its] economy, Israel has weathered the global recession reasonably well. The government did not have to bail out banks or set off an explosion in short-term spending. Instead, it used the crisis to solidify the economy’s long-term future by investing in research and development and infrastructure, raising some consumption taxes, promising to cut other taxes in the medium to long term. Analysts at Barclays write that Israel is “the strongest recovery story” in Europe, the Middle East and Africa.
Interestingly, when Michael Porter (a name near and dear to most MBA students) penned his definitive tome "The Competitive Advantage of Nations" in 1990, in its many pages he saw fit to only mention Israel once! His single comment being that, "Israel's principal clusters [of innovation] are related to agriculture and defense." It seems clear that if Mr. Porter were writing today he'd likely want to revise and elaborate on this assessment.
