Start-up Nation: The Story of Israel's Economic Miracle is a 2009 book by Dan Senor and Saul Singer detailing Israel’s entrepreneurial journey. It examines how a young nation was able to reach economic growth and have more companies listed on the Nasdaq than any other foreign nation at the time of writing.
With this achievement and some of the perceptions about Israel as the “Start-up Nation”, one would think that starting a business in the country is easy. However, research from the Global Entrepreneurship Monitor reveals a different reality. In fact, in the Israel GEM 2018/2019 Report, Professor Ehud Menipaz and Yoash Avrahami highlight a striking reality: 82.1% of Israeli respondents believe it is difficult to start a business! Israel ranks 38 out of 43 GEM countries in the perception of ease to start a new business. Menipaz provides rationale and explains some of the other key findings from the report in the below Q and A.
The analysis of the question "Is it easy to start a business in Israel in 2018/2019?" shows significant differences in the answers among the population's sectors. The Arab minority sector, which accounts for about 20% of Israel’s population, stands out in that 45.4% said that it is easy to start a business in Israel in 2018/2019. On the other hand, the Jewish sector shows the opposite, with only 9.4% believing that it is easy to start a business in Israel.
Menipaz: The findings point to rather an interesting insight. The minorities in Israel have a better opportunity to start a business than the rest of the population. As a matter of fact, the integration of minorities in the Israeli economy has been always a main goal of the government, NGOs and the business community. Since statehood in 1948 , with a population of only 600,000 residents and a GNP per capita of about $600, the country absorbed millions of immigrants from virtually all corners of the earth to become a nation of over 9 million residents and a GNP per capita of over $45,000, surpassing the GNP per capita of the UK, France and Japan. The integration of minorities, including the Arab minorities, has been propelled by public policy and practices that are reflected in the GEM results as noted in the question.
Israel ranked third among developed countries in the fear of failure category at a 60.2% rate. This is the highest level of fear measured in the study in Israel over 20 years. Any reaction to this?
Menipaz: This finding points to the need to promote economic and security certainty; prevent giving priority to large, established companies; and improve competition in the economy, opening conditions for new small businesses and discriminatory taxation.
Is there an explanation for the jump in Total Early Stage Entrepreneurial Activity Rate (TEA) levels among the Arab population in Israel from 2017 (2.7%) and 2018 (8.9%)?
Menipaz: As stated earlier, several initiatives by the government, NGOs and the business community helped propel the TEA by a factor of three between 2017 and 2018. The government provides special considerations regarding government contracts and the banks provide a venue specifically geared towards the financing of minority initiated ventures.
Can you share what role education in Israel needs to play to foster entrepreneurship?
Menipaz: The academic programs at research universities and colleges in Israel include degree programs and specializations in entrepreneurship and innovation. The newly created call for innovation communities by our Ministry of Economics and Industry is partially based on an intense cooperation between academia and industry. Curriculum geared towards creative and high tech industries lure more students to enroll in academic programs. The decades old Young Entrepreneurs Israel, an NGO in which I serve as a Founding Director, is based on an annual program of teaching entrepreneurship to high school and middle school students and is mentored by seasoned business executives, university students and school teachers. The mandatory army service for men and women aged 18-21 is in itself a great entrepreneurship education program to a certain extent since the young person has an opportunity to work in a technological environment, as part of a team, taking responsibility for operating advanced equipment under challenging conditions.
At the same time, we recognize the need to further entrepreneurship education at a younger age, say kindergarten and elementary school.
What are some of the other main findings from the 2018/2019 Israel study?
Menipaz: From our research, we pointed out 14 key findings. Three that are particularly noteworthy (that haven’t been covered yet in these questions) are:
1. A decrease in TEA level, from 12.7% in 2017 to 10.9% in 2018/2019.
2. Significant deviations in entrepreneurship levels in the orthodox sector, with women showing a level of 13% compared to 7.4% among men.
3. The Improvement-Driven Opportunity (IDO) index, which measures the level of motivation for entrepreneurship out of choice, increased in 2018/2019 to 43.9%, the highest score of Israel in the last four years.
Refer to page 9 of the full study to see an overview of the other main takeaways from the study.
The research was carried out with the support of the Ben Gurion University of the Negev, the Ira Foundation for Business Technology & Society and the Ministry of Economics and Industry.