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Venture capital start-up co-evolution and the emergence & development of Israel's new high tech cluster

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Author Info

  • Gil Avnimelech
  • Morris Teubal

Abstract

This paper provides an account of the emergence and development of a Venture Capital Industry in Israel, and the role it played in the recent successful growth of Israel's high tech cluster. The paper focuses on Israel's Venture Capital Industry, its emergence and operation during the 90s, in which period the number of VC Funds increased from 2 to over 100. The context is the transformation of Israel's high tech industry from the Defense-dominated Electronics industry of the 70s/80s to the 'Silicon Valley' model of the 90s characterized by large numbers of SU companies. During this period the share of high tech in manufacturing industry; and ICT's share in the Business Sector increased considerably attaining one of the highest levels worldwide. Given the importance of Venture Capital an analysis of the waves of new SU companies should be done jointly with an analysis of the emergence and development of Venture Capital (and vice-versa). The approach adopted is Evolutionary & Systemic rather than a focus on 'the operation' of a mature Venture Capital industry, which has been more frequent in the VC literature. We focus on the Dynamics of Venture Capital particularly of the emergence and of subsequent development of the industry. We link these with core Evolutionary concepts such as variation, selection and reproduction (Nelson 1995). The paper discusses the co-evolutionary and dynamic process involving the business sector, technology policies, venture-capitalists, individuals & Startup companies, and foreign linkages. We attempt to show that VC emergence is part & parcel of the reconfiguration of a pre-existing Electronics Industry one involving large amounts of SU and new and powerful links with global capital markets. The main conclusions and policy lessons of the paper are that specific technology policies targeted to the Venture Capital sector can be effective only to the extent that favorable background conditions exist or are created. The main groups of factors, events or sub-processes influencing the emergence process which started in 1993, and subsequent development, are: (1) favorable background conditions; (2) features of the immediate pre-emergence period (1989-92); (3) Targeted Policies which directly triggered VC Emergence (1993-98); (4) Strong VC-SU co-evolution; (5) Global Capital Market Links.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 13 (2004)
Issue (Month): 1 ()
Pages: 33-60

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Handle: RePEc:taf:ecinnt:v:13:y:2004:i:1:p:33-60

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Related research

Keywords: Venture capital; Start-up; High-tech cluster; Emergence; Evolutionary;

References

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  1. Bresnahan, Timothy F & Gambardella, Alfonso & Saxenian, AnnaLee, 2001. "'Old Economy' Inputs for 'New Economy' Outcomes: Cluster Formation in the New Silicon Valleys," Industrial and Corporate Change, Oxford University Press, vol. 10(4), pages 835-60, December.
  2. Grinblatt, Mark & Hwang, Chuan Yang, 1989. " Signalling and the Pricing of New Issues," Journal of Finance, American Finance Association, vol. 44(2), pages 393-420, June.
  3. Allen, Franklin & Faulhaber, Gerald R., 1989. "Signalling by underpricing in the IPO market," Journal of Financial Economics, Elsevier, vol. 23(2), pages 303-323, August.
  4. Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July.
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Citations

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Cited by:
  1. Jones, Morgan & Mlambo, Chipo, 2009. "Early-stage venture capital in South Africa: Challenges and prospects," MPRA Paper 42890, University Library of Munich, Germany, revised 21 Nov 2012.
  2. Amir Shoham & Gil Avnimelech, 2012. "The development of the successful high tech sector in Israel, 1969-2009," World Review of Entrepreneurship, Management and Sustainable Development, Inderscience Enterprises Ltd, vol. 8(1), pages 53-69.
  3. Cristiano Antonelli & Morris Teubal, 2009. "Venture Capitalism, New Markets and Innovation-led Economic Growth," ICER Working Papers 03-2009, ICER - International Centre for Economic Research.
  4. Antonelli, Cristiano & Teubal, Morris, 2008. "Venture Capital as a Mechanism for Knowledge Governance: New Markets and Innovation-Led Economic Growth," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200805, University of Turin.
  5. Antonelli, Cristiano, 2005. "Models Of Knowledge And Systems Of Governance," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200501, University of Turin.
  6. World Bank, 2004. "Chile : New Economy Study, Volume 2. Background Documents," World Bank Other Operational Studies 14711, The World Bank.
  7. Dafna Schwartz & Raphael Bar-El, 2006. "Venture Investments in Israel - A Regional Perspective Dafna Schwartz and Raphael Bar-El Ben-Gurion University, School of Management, Israel," ERSA conference papers ersa06p868, European Regional Science Association.
  8. Alessandro Rosiello & Morris Teubal & Gil Avnimelech, 2008. "Towards the Framing of Venture Capital Policies: a Systems-Evolutionary Perspective with Particular Reference to the UK/Scotland and Israeli Experiences," ICER Working Papers 21-2008, ICER - International Centre for Economic Research.
  9. Poh Kam Wong & Lena Lee & Maw Der Foo, 2008. "Occupational Choice: The Influence of Product vs. Process Innovation," Small Business Economics, Springer, vol. 30(3), pages 267-281, March.
  10. Cristiano Antonelli & Morris Teubal, 2007. "Venture Capitalism as a Mechanism for Knowledge Governance: the Emergence of the Markets for Knowledge Intensive Property Rights," ICER Working Papers 12-2007, ICER - International Centre for Economic Research.
  11. Antonelli, Cristiano, 2005. "The Governance Of Localized Knowledge: An Information Economics Approach For The Economics Of Knowledge," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200502, University of Turin.
  12. Antonelli Cristiano & Teubal Morris, 2011. "From the corporation to venture capitalism: new surrogate markets for knowledge and innovation-led economic growth"," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201106, University of Turin.
  13. Antonelli, Cristiano, 2003. "The Governance of Technological Knowledge: Strategies, Processes and Public Policies," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200306, University of Turin.
  14. Liad Wagman & Yoni Pruzansky, 2011. "Intellectual Property Protection and Firm Innovation," Economics Bulletin, AccessEcon, vol. 31(4), pages 2922-2932.
  15. Yusuf Shahid & M. Anjum Altaf & Kaoru Nabeshima, 2004. "Global Change and East Asian Policy Initiatives," World Bank Publications, The World Bank, number 14928, October.
  16. Gil Avnimelech & Morris Teubal, 2004. "Strength of Market Forces and the Successful Emergence of Israel's Venture Capital Industry. Insights from a Policy-Led Case of Structural Change," Revue ├ęconomique, Presses de Sciences-Po, vol. 55(6), pages 1265-1300.
  17. Jackie Krafft, 2010. "Profiting in the info-communications in the age of broadband: lessons and new considerations," Post-Print hal-00203801, HAL.
  18. Teubal, Morris & Luukkonen, Terttu, 2006. "Venture Capital Industries and Policies: Some Cross-Country Comparisons," Discussion Papers 1006, The Research Institute of the Finnish Economy.

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