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Israel’s high-tech sector leads country’s exports, but lags behind on inclusivity

The Israel Innovation Authority published its annual innovation report, which refers to the “industry of Jewish men”

The high-tech park in Ra’anana, in Central Israel. Photo: Tidhar Group Ltd. website
The high-tech park in Ra’anana, in Central Israel. Photo: Tidhar Group Ltd. website

The Israeli high-tech sector was responsible for a whopping 54% of the country’s total exports in 2021, while the ratio of salaried employees in the field reached 10.4% of all employees. In addition, Israel took the OECD lead on R&D expenditure as a percentage of its GDP, with 5.44%.

Also in 2021, the country’s various companies enjoyed 88 mega-funding rounds of over USD 100 million, and local startups raised over $25 billion, with 56% of the investments going to the fields of enterprise software, cyber, and fintech.

All of this impressive data can be found in the recently-published Annual Innovation Report – State of High-Tech 2022, produced annually by Israel Innovation Authority. But this 70-page report also points to the shortcomings of the start-up nation.

Thus, for example, in 2019 Israel was placed in the very last place in the OECD with regards to government expenditure on R&D (9.6%). The country also dropped 5 places in the Global Innovation Index – from number 10 in 2019, to number 15 in 2021.

An additional problem is that despite many efforts, the ratio of Arab citizens of Israel as well as Jewish ultra-Orthodox high-tech employees plateaued, staying at a low 4.7% in 2021. The well-known gaps between Israel’s central (Silicon Wadi) and peripheral areas are also present: the representation in hi-tech of periphery residents is lower than their relative share of salaried employees throughout the country by 33%.

Out of the roughly 361,500 people in Israel who work in hi-tech, 240.8 thousand are men, and only 120.7 thousand are women. There are only 5,000 Arab men and 3.3 thousand ultra-orthodox men who work in high-tech. Out of the 120.7 thousand women in the sector, 7.2 thousand are ultra-orthodox, and only 1,500 are Arab (“an industry of Jewish men”, as the report authors note).

Unsurprisingly, the most popular course of academic studies is computer science, chosen by 40% of undergraduate male students and 13% of female students. It is interesting to note that the vast majority of high-tech degree graduates do not progress to advanced degrees in this field, and chose to find employment and move up the ladder.

So what does Israel’s high-tech industry need to do better and enjoy greater inclusivity and further growth? The researchers place a strong emphasis on the need to strengthen collaboration between the industry and academia, connecting innovation to both the private and public sectors, easing the harsh regulatory climate, promoting the adoption of AI and Big Data, and improving digital participation in the public sector.

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