Innovative Companies Love Israel

More than 500 multinational corporations (MNCs) representing 35 countries are now active in Israel, according to a landmark study of multinational activity in the Jewish state. Of the 536 multinationals in Israel, 55 percent are based in the United States, 27 percent are from Europe, and 15 percent are from the Asia-Pacific region.

Technology companies account for nearly 40 percent of the MNCs, followed by pharmaceutical and healthcare companies (11 percent), financial services firms (10 percent), industrial products companies (10 percent), and telecommunications and media firms (8 percent).

Most of these multinationals are in Israel because they are trying to enhance their core capabilities through innovation, according to The State of Innovation, a report published by the business-consulting firm PricewaterhouseCoopers. They are looking to Israel—often referred to as the “Start-up Nation”—for its unique technological environment, which combines advanced development capabilities with a spirit of innovation, risk taking, and entrepreneurial drive.

The report notes that Israel, with a population of just under 9 million (a tenth of 1 percent of the world’s population), has the highest per capita concentration of start-ups in the world: more than 6,600—14 times the per capita concentration of start-ups in Europe. Israel ranks number one globally in research and development expenditures per Gross Domestic Product and attracts the highest rate of venture-capital funding per capita in the world.

“The Israeli way of approaching risk and failure, and the importance of giving startups independence and space to innovate—these core characteristics of the Israeli ecosystem allow MNCs to step outside of their comfort zone, re-think their approach to innovation and effectively tap into Israeli innovation,” the report states.

Another recent report found that more than 40 major European corporations now operate innovation outposts in Israel. European Corporate Innovation Outposts in Israel: The Who’s Who showed that nearly half of these European outposts were set up in Israel over the past three years, growing at a pace of about eight per year.

Thirteen of the companies are from Germany, followed by France with 10, the UK with seven, and Switzerland with four. The Netherlands and Sweden operate two corporate outposts in Israel; and Italy, Finland, and the Czech Republic each have one such center in the country.

The report noted that more European companies will establish a presence in Israel, as “physical proximity to the key hubs of innovation is becoming an increased necessity to remain competitive.”

Israel is also emerging as an unmatched destination for cybersecurity innovation. In 2018, Israeli start-ups received $1.2 billion, or almost 20 percent of global venture-capital investments in cybersecurity, a 47 percent increase from the previous year. Another report showed that in 2018, Israel surpassed China as the leading destination for venture-capital investments in cybersecurity companies outside the United States.

Recently, Ford Motor Company announced it had opened a research center in Israel to develop new technologies for driverless cars. Chairman William Clay Ford, Jr. called Israel “ground zero” for technologies related to the fast-growing field of automated driving. In addition to Ford, BMW, Daimler, General Motors, and many other car manufacturers have also opened laboratories in Israel.

Israel’s emergence as a leading high-tech hub for global innovation and international investors points to the effective failure of the Boycott, Divestment and Sanctions (BDS) movement, a Palestinian-led campaign aimed at delegitimizing the Jewish state. Almost 15 years after its founding in 2005, the BDS movement’s cumulative proportion of economic damage to Israel since 2010 has been 0.004 percent of the Israeli economy, according to a study by Financial Immunities, an Israeli financial advisory firm. “To put it more colorfully, if the Israeli economy’s yearly income were to average one million Israeli shekels, the damage from the sanctions would have been 40 shekels—a completely negligible amount,” said the company’s CEO, Adam Reuters.