Israel has thrived during the global collapse-thanks to an entrepreneurial culture built on compulsory military service. Dan Senor and Saul Singer on why U.S. companies should take notes.
For all the press coverage of the Middle East, there is one side of Israel that gets scant attention: the country's economy has the highest concentration of innovation and entrepreneurialism in the world today. For years, multinational technology companies and global investors have been beating a path to Israel. Even in 2008-a year of global economic turmoil-per capita venture investments in Israel were 2.5 times greater than in the United States, more than 30 times greater than in Europe, 80 times greater than in China, and 350 times greater than in India. And Israel still boasts the highest density of start-ups in the world (a total of 3,850 start-ups, one for every 1,844 Israelis). More Israeli companies are on NASDAQ than companies from all of Europe, China, India, Korea, and Japan combined.
The root of Israel's economic dynamism-and the way it weathered a global downturn-can be traced to government policies that cultivate a unique entrepreneurialism. These include innovative immigration policies and disproportionate research and development spending (Israel is the world leader in the percentage of the economy that is spent on R&D). But the real turbocharger has been its universal military training and national service program.