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Entrepreneurial High-tech Cluster Development: Israel's Experience with Venture Capital and Technological Incubators


  • Gil Avnimelech
  • Dafna Schwartz
  • Raphael Bar-El


This study deals with policy instruments supporting high-tech start-up activity. It is based on the Israeli experience with two specific government programmes: Yozma, which triggered the emergence of the venture capital industry, and the technological incubators programme. These programmes had significant impact on the development of the high-tech cluster in Israel. While venture capital has positive impact on the growth and strength of high-tech clusters, it has also significant drawbacks, such as narrow geographical distribution of high-tech activities and narrow technological diversification. In this study we will analyse whether the interaction between Yozma programme and the technological incubators programme, reduced these drawbacks. We will examine whether the technological incubators in peripheral areas in Israel succeeded in attracting high-tech start-up activity as well as venture capital investments, and whether the incubators were supporting more diversified technological fields than the venture capital industry. In addition, we will try to determine whether cooperation between venture capitals and incubators led to more balanced investments patterns in terms of geographical distribution and technological diversification. Our empirical work is based on a population of 3747 Israeli high-tech firms, established between 1991 and 2004. In analysing this data we will attempt to determine whether venture capitals and incubators have dissimilar effectiveness in supporting start-ups and different technological and geographical preferences. The findings suggest that while venture capital-backed firms have higher success rates, their activities are more concentrated in central areas. In contrast, the technological incubators proved successful in attracting activity to peripheral areas and to less popular technologies, but their success rates are very low. Finally, the findings suggest that incubator graduates that received venture capital financing had significantly improved results.

Suggested Citation

  • Gil Avnimelech & Dafna Schwartz & Raphael Bar-El, 2006. "Entrepreneurial High-tech Cluster Development: Israel's Experience with Venture Capital and Technological Incubators," European Planning Studies, Taylor & Francis Journals, vol. 15(9), pages 1181-1198, July.
  • Handle: RePEc:taf:eurpls:v:15:y:2006:i:9:p:1181-1198
    DOI: 10.1080/09654310701529078

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    Cited by:

    1. Claire Champenois & Henry Etzkowitz, 2018. "From boundary line to boundary space: The creation of hybrid organizations as a Triple Helix micro-foundation," Post-Print hal-01988410, HAL.
    2. Ibrahim Semih Akçomak, 2009. "Incubators as Tools for Entrepreneurship Promotion in Developing Countries," WIDER Working Paper Series RP2009-52, World Institute for Development Economic Research (UNU-WIDER).
    3. Daniel Felsenstein, 2011. "Capital Deepening and Regional Inequality: An Empirical Analysis (refereed paper)," ERSA conference papers ersa10p759, European Regional Science Association.
    4. VANDERSTRAETEN, Johanna & MATTHYSSENS, Paul & VAN WITTELOOSTUIJN, Arjen, 2012. "Measuring the performance of business incubators," Working Papers 2012012, University of Antwerp, Faculty of Business and Economics.
    5. Isabel Diez-Vial & Angeles Montoro-Sanchez, 2017. "Research evolution in science parks and incubators: foundations and new trends," Scientometrics, Springer;Akadémiai Kiadó, vol. 110(3), pages 1243-1272, March.
    6. Daniel Felsenstein, 2015. "Factors Affecting Regional Productivity and Innovation in Israel: Some Empirical Evidence," Regional Studies, Taylor & Francis Journals, vol. 49(9), pages 1457-1468, September.
    7. Schwartz Dafna & Bar-El Raphael & Malul Miki, 2008. "A Joint Virtual Advanced Technology Incubator - A New Pattern of Israeli-Palestinian Economic Cooperation," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(2), pages 1-19, July.
    8. Michael Beenstock & Daniel Felsenstein & Nadav Ben Zeev, 2011. "Capital deepening and regional inequality: an empirical analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 599-617, December.

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