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Innovation-Based Industrial Policy in Emerging Economies? The Case of Israel's IT Industry


  • Breznitz Dan

    (Sam Nunn School of International Affairs and the School of Public Policy, Georgia Institute of Technology)


In the last decade, few countries have figured prominently as cases of late-late developers that achieved worldwide success with their Information Technology (IT) industries. This paper focuses on the Israeli case and argues that uniquely in that group, and in contradiction to the model proposed by late development theories, Israel's competitive advantage in the IT industries, is in Research and Development (R&D). The paper's main arguments are that (a) the declared aim of Israel's industrial policy has been to develop a "science-based" industrial system similar to what we see in Israel today; (b) however, these policies, focused on diffusion and not on creation of capabilities, were successful only because of the existence of an already sophisticated and extensive R&D capability in the universities markedly different from other Newly Industrialized Countries. Looking at the present the paper concludes that the same operational model that led Israel's IT industry to success might now be undermining its future growth.

Suggested Citation

  • Breznitz Dan, 2006. "Innovation-Based Industrial Policy in Emerging Economies? The Case of Israel's IT Industry," Business and Politics, De Gruyter, vol. 8(3), pages 1-38, December.
  • Handle: RePEc:bpj:buspol:v:8:y:2006:i:3:n:3

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    Cited by:

    1. Breznitz, Dan, 2007. "Industrial R&D as a national policy: Horizontal technology policies and industry-state co-evolution in the growth of the Israeli software industry," Research Policy, Elsevier, vol. 36(9), pages 1465-1482, November.
    2. Breznitz, Dan & Zehavi, Amos, 2010. "The limits of capital: Transcending the public financer-private producer split in industrial R&D," Research Policy, Elsevier, vol. 39(2), pages 301-312, March.

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