A study recently commissioned by Google examined the impact of Israel’s renowned technology industry on the country’s overall economy. The results – shocking to many – should serve as a mind-opener to both entrepreneurs and policymakers in the United States and around the globe.
Over the past couple decades Israel has emerged as a major player in the technology sector, producing many firms that have enhanced productivity around the globe. Checkpoint, Waze, NDS, and ICQ are all Israeli exports.
Technological innovation has allowed the nation of under 8 million people to list a significantly disproportional number of firms on the NASDAQ – at one point the country even boasted the highest number of firms on the exchange after the United States.
Yet, as noted in the Google-funded study, despite its disproportional success in producing new technologies that seemingly should enhance efficiency, Israel ranks only 24th among the 34 members of the OECD (Organisation for Economic Co-operation and Development) in terms of productivity, way behind many countries whose technology industries seem dramatically inferior.
How can a technology leader be so relatively unproductive? How can a nation boasting disproportionate innovation lag economically behind less creative societies?
The answer is a lesson from which we all can learn: Effectiveness in leveraging technology is a much greater determiner of economic success than technological innovation.
Israel’s private firms create amazing technologies, but its government has not implemented sufficiently comprehensive plans to boost national productivity by maximally leveraging information and communication technology. While Israelis participating in the so-called “start up nation” economy produce wealth and create productivity-enhancing inventions, they still encounter unnecessary inefficiencies, and many of their compatriots remain technologically challenged. The benefit of Israeli innovation, and of the Internet era in general, remain under-realized on a nationwide level.
Contrast Israel with Singapore. Thirty years ago, the two nations reported similar productivity per capita. But, while Israeli companies were creating new technologies, Singapore was establishing and implementing national technology plans in an effort to boost national efficiency. The result: While Israeli innovation has created wealth, Singapore has created far more – with Singapore’s per capita GDP today reaching levels approximately double those of Israel’s.
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