Travel Reference
In-Depth Information
LEADING INDUSTRIES
Because of the very small domestic market, most of Israel's biggest industrial companies are
focused on selling overseas, in many cases generating just a few percentage points of their total
sales at home. Companies have to operate in multiple foreign markets with differing regula-
tions, business practices, and currencies while they contend with the disadvantages of high
costs and the unfavorable economies of scale at home. Given the challenges faced, Israeli man-
agers must act nimbly, adapting quickly to changing market conditions and swiftly developing
innovative products. Israel's leading manufacturing industries are machinery and electronics,
defense, chemicals and pharmaceuticals, food, plastics, and transportation equipment.
Industry made its fi rst appearance in the 1920s when entrepreneurial immigrants arriving
from Poland set up small textile factories. The Poles were later joined by German business-
people who founded bigger enterprises, including the Ata Textile combine, the biggest indus-
trial employer in the 1940s. However, attempts in the early years of the state to build heavy
industries like steel and automobiles failed in the absence of suffi cient economies of scale and
raw materials. Instead, textiles became the focus of a government-led program of subsidies and
other incentives for private business starting in 1957.
Protected from import competition and boosted by fi nancial aid, the industry employed
about 15 percent of the country's industrial workforce by 1985. But by the late 1980s, the gov-
ernment began removing protection for local industries. Textiles and Israel's other traditional
industries could no longer compete with lower-cost producers abroad, leading to painful fac-
tory closures and rising unemployment. Technology, pharmaceutical, and other industries
where innovation was more important than cost gradually took the place of the traditional
industries.
High Technology
Technology emerged as Israel's leading industry in the 1990s. In 2008, it accounted for about
20 percent of Israel's industrial output and about one-quarter of its exports of goods and ser-
vices, employing about 168,000 people, 7 percent of the country's private-sector labor force.
The foundation of Israel's technology sector was made possible by the country's institutions of
higher education and science, which even in the early years of the state were of an unusually
high caliber thanks to the immigration of scientists from Europe. Israel's workforce also had a
large proportion of scientists and engineers. Today, it counts 140 scientists and technicians and
135 engineers for every 10,000 people, the highest ratio in the world.
But technology is not only a function of raw scientifi c ability. Creating the start-up com-
panies that turn new ideas into commercial products requires a cadre of entrepreneurs and
a specialized fi nancing system — namely, venture capital. Israel has succeeded in bringing all
these ingredients into the mix. Even the army has played a critical role as the source of many
of the industry's innovations and as a training ground for future managers.
The country's technological know-how was initially devoted to defense, especially after
France, then the country's chief arms supplier, imposed an embargo on Israel in 1967. The
