The prerequisites of public policy for technology innovation

Abstract

We studied the prerequisites of public policy for technology innovation, especially in small- and medium size countries (but not limited to), by analysing the Israeli High-Technology (Hi-Tech) experience over the past 15 years and by interviews with local industry professionals and entrepreneurs as well as from a variety of data sources. We find that the prerequisites for the formation of a viable Hi-Tech sector comprise the following major components: creating or leveraging on a local comparative advantage at the firm or sub-sector level, importing professional high-risk capital and reducing tangible and intangible international trade costs by forming a suitable habitat, infrastructure-wise. We recommend focusing first on the investors rather than on the entrepreneurs. We argue that the Israeli experience is valid for regions and countries that are interested in setting up or strengthening their innovative Hi-Tech sector.