The lessons of the Israel Innovation Authority

James Riley

It is more than 12 years since authors Dan Senor and Saul Singer chronicled Israel’s “economic miracle” in the landmark book Startup Nation. The Israel innovation ecosystem has changed dramatically in the years since – just like the rest of the world – but its trajectory of success has not.

So, what are the lessons that Australian policymakers and business leaders can take from the Israel example? What are the structural settings that have been successful in Israel that might also have a successful impact in Australia?

Dror Bin is the chief executive of the Israel Innovation Authority, a key piece of the support infrastructure that the country’s research translation success.

Mr Bin joins the Australia-Israel Chamber of Commerce Innovation Summit 2021 from 2.30pm today (Wednesday 20 October) on a panel session titled “The transformation we need to have – building the industries and jobs of the future.” You can reserve a seat at this virtual event here.

Dror Bin
Israel Innovation Authority chief executive Dror Bin

In this interview, Mr Bin talks about the structures in place in Israel to connect academic research with the business sector, and the IP sharing arrangements that help remove friction from the process.

He describes innovation as “by far the most valuable resource for the State of Israel, serving as a national asset crucial to economic prosperity.”

InnovationAus: What are the most important considerations that a government designing a standard contract in this area should consider?

Dror Bin: The Israel Innovation Authority bridges between academic research and the business sector through its Knowledge Commercialization program. We encourage academia to find the solutions which the market needs by pushing them to cooperate with an Israeli company that might embrace the knowledge, and to focus their research on joint mature proof of concept outside the lab. We lower the commercial risk undertaken by the industry with a toolbox of funding and expert guidance for validation of the knowledge and adapting it to the company’s needs while training its workforce to embrace the new knowledge.

When designing contracts for sharing the value of IP between researchers, universities and businesses need to consider three important elements.

Firstly, short SLAs, which are the ability to provide the service as soon as possible and allow for validation and adaptation short periods.

Secondly, academia should retain ownership of the IP while giving a license to a company in a specific field. This will allow a wide spread of knowledge and reuse of commercialization in an event that the company goes bankrupt.

Thirdly, there needs to be consideration for the need to create standards of royalties’ percentage by sector and technology maturity.

InnovationAus: What has worked particularly well in the Israel system? How important has these standard contracts been to getting IP out of universities and research institutes and commercialised?

Dror Bin: Necessity, despite being the mother of invention, is not the only reason that Israel makes such a profound and disproportionate contribution to global innovation. Nor can its impact be exclusively laid at the feet of its creative academics, daring entrepreneurs or even the technologically trained Russian immigrants of the 1990s, although each plays a role in its success. Israel is a world player because of these factors and more are brought together into a unique economic ecosystem – a synthesis accomplished and led by the Israel Innovation Authority, an independent, impartial, government funded agency.

Streamlining a range of government efforts to boost Israel’s technological economy since the 1970s, the Authority is leading the country’s innovation policy, strengthening the infrastructure of its knowledge industry, and orchestrating the essential collaboration between academia and private initiative. The Authority id not only supporting the mature knowledge “on the shelf” but also making sure to create a sustainable and innovative deal flow of academic applied knowledge.

Standard contracts relating to getting IP out of the universities and research institutes are important as they ensure the involvement of a company in the early stages of the academic research process and later on allow for validation of the research in an external facility, thus bringing the academic knowledge a step closer to actual application by the industry.

InnovationAus: Israel has been able to attract an incredible number of multinational corporations to establish research facilities in Israel – even companies renowned for their highly centralised R&D. What are the three most important structural policy elements that has enabled Israel to successfully attract such R&D effort from offshore companies?

Dror Bin: Israel Innovation Authority works is premised on the belief that economic robustness prevents national vulnerability. Israel must lead strategically and in order to gain this economic strength which stems mainly from its technological superiority and from a strong ecosystem. Israel’s strongest assets is its wealth of multidisciplinary talent in scientific, technical and industrial fields.

The country’s small size is another advantage as everybody knows each other and Israelis know how to “think outside the box” and operate with a sense of urgency and speed. However, we can only compete on the global market if we have a complete ecosystem. The presence of Multinational activity in Israel is part of this ecosystem.

The main reason Multinational companies are coming to Israel is the high quality of science and technology, talented workforce and innovative and strong startup ecosystem.

The Innovation Authority balances the public and private sectors. If you only have innovation but not the ability to bring it to the market, then you don’t have an ecosystem and cannot compete globally. And if you can take it to the market but you don’t have enough skilled personnel, infrastructure, regulation, and a friendly environment for doing business, you also have a problem. This requires a fine balance between a free market and a market that is supported by the government.

Since disruptive, tech-driven businesses inevitably face a high level of risk, private investment in cutting-edge R&D in certain fields is often lower than optimal. The Innovation Authority seeks to overcome these “market failures” by reducing the level of risk for these companies. As a government entity, we protect the free market where there is a market failure.

There are three pivotal activities that attract an incredible number of multinational corporations to establish research facilities in Israel.

Firstly, the creation of a VC industry, the YOZMA program. Originating from a government program (in 1993) aimed at prompting venture investment in Israel, Yozma program jumpstarted the Israeli VC industry. Between 1993 and 1998, the government offered to provide 40% of the money offered by private investors in combined funds, supporting more than 40 companies. The value of Yozma increased from $100 million in 1993 to $250 million by 1996, and the project is regarded as a rare example of government venture capital success.

Secondly, promoting an increase of R&D spending in the industry – (1970 – 2000) mainly through the operation of the Office of the Chief Scientist which later in 2017 became the Innovation Authority.

Thirdly, investing in good research universities (1921-2021). The fruits of this effort are seen throughout the years where researchers from Israel’s nine universities excel in developing everything from sensors, solar power and robotics to 3-D printing, artificial intelligence and cancer therapies – to name just a few of the many fields where Israeli breakthroughs have made an impact in recent years.

InnovationAus: What are the most important International Collaboration programs that Israel participates in? (eg EU Frameworks) … How can a modest-sized economy like Australia compete for collaboration attention? What does the Innovation Authority look for in international collaboration partners?

Dror Bin: Innovation is by far the most valuable resource for the State of Israel, serving as a national asset crucial to economic prosperity. Israel Innovation Authority mission is to strengthen the innovation ecosystem and promote innovation, entrepreneurship, and disruptive technologies as a leverage for inclusive and sustainable economic growth.

The Authority’s International Collaboration Division is responsible for coordinating international collaboration in innovative R&D knowledge and technology between Israeli companies and counterpart organizations abroad. Offering a unique toolbox for multinational corporations, this division supports strategic alliances that are made possible through an array of bilateral and multilateral cooperation agreements and bi-national funds, each one with its unique added value.

The largest collaboration we have is via the European Framework Program, the largest R&D platform in the world. Israel has been an associated country to the program for 25 year and it has transformational impact on academic research and substantial impact on industrial R&D in Israel.

Israel has a long-lasting collaboration with the US via three funds – BIRD, BARD and BSF for Scientific, Industrial and Agricultural research. These funds have supported thousands of joint projects throughout the years.

Australia is a unique ecosystem because of the scientific excellence, local regulation and also because it is a substantial market and has the benefit of being remote. If Israeli entities are looking at the Australian market, they would need a local partner to introduce new technologies and innovation.

With deep knowledge and understanding of the unique challenges facing companies and entrepreneurs, the Israel Innovation Authority provides a variety of practical tools and funding platforms aimed at addressing the dynamic and changing needs of the local and international innovation ecosystems.

InnovationAus: What collaborations are currently underway with Australian institutions? Is there any area of technology or industry in Australia that looks interesting to the Israel Innovation Authority right now?

Dror Bin: Currently, the Israel Innovation Authority maintains three agreements with Australian entities:

  • Victoria government: This agreement was signed in 2005, with the Department of Economic Development, Jobs, Transport and Resources, Victoria’s Government. The last joint call for proposals was at the beginning of 2020.
  • NSW government: This agreement was signed in 2016, With NSW Trade and Investment under NSW Department of Industry. The last joint call was in 2018
  • Federal Agreement: This agreement was signed in 2017 with Department of Industry, Innovation and Science of Australia.

The most active collaborations are under the agreements with Victoria and NSW. We had in total 55 application for joint collaborations, of which 18 were approved following a rigorous examination of the applications by experts from both Israel and Australia.

Moreover, the Israel Innovation Authority is interested in conducting joint pilots with Australian entities in the area of Climate-tech, Agri-tech, Smart Cities, Food-tech, Health & Life- Science. Such collaboration will allow companies to conduct semi-commercial and pilot demonstrations of new technologies.

The goal of such pilot program is not only to test innovative technologies on a larger scale, but also to shape and adapt to the regulatory framework that will eventually oversee these technologies in such a way that they enable the market to evolve and be competitive.

InnovationAus is an official media partner for the Australia-Israel Chamber of Commerce Innovation Summit 2021. This article was produced as a part of that partnership. You can secure your tickets to the Innovation Summit 2021 here.

Do you know more? Contact James Riley via Email.

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