Innovation policy, innovation and innovation finance co-evolution: The Israeli case and some implications

This paper adopts a broad co-evolutionary framework linking the evolution of Innovation Policy on the one hand and Business Innovation and SU evolution and VC/Innovation Finance evolution on the other. The focus is on the Israeli experience, which which might illuminate the type of processes that may occur elsewhere. It combines two approaches of the evolutionary economics literature: that which searches for mutual links between aggregates such as the co-evolution between technology and institutions pioneered by Nelson (1994, 2001, 2007); and links among agents in the complexity literature, e.g., Allen’s 2004 piece (Allen 2004). This paper will strongly suggest that co-evolutionary processes in Israel contributed to the emergence during 1993-2000 of a VC industry and market and of an entrepreneurial, ICT-oriented high-tech cluster (EHTC). They began at least two and half decades earlier, with the creation of a specific agency in charge of direct support of R&D in firms (OCS-Office of the Chief Scientist, Ministry of Industry and Trade, and its Grants to BERD program). The specific objectives are: i Present a broad co-evolutionary framework of analysis linking Innovation, Innovation Policy, and Innovation Finance, focused on the Israeli experience during 1969-2000; ii Link the above with the emergence of a high impact VC industry and market and, related to this, the emergence of an EHTC between 1993-1996/7 (Phase 3 below); iii Suggest some possible implications of the analysis, in particular in relation to an Innovation and Structural-Change led process of Economic Growth.