The Making of a High Technology Node: Foreign-owned Companies in Israeli High Technology

Abstract

FELSENSTEIN D. (1997) The making of a high technology node: foreign-owned companies in Israeli high technology, Reg. Studies 31, 367-380. This paper conceptualizes the role of Israel's high technology sector as that of a node in a global production network. A node can be characterized by the intensity of the incoming and outgoing flow of information, investments and so on, that pass through it. Foreign investment is one indicator of the centrality of a node. Using case study and aggregate firm level evidence of US foreign investment in Israeli high technology, the paper tests the hypothesis that foreign involvement in the node economy is based on a rather different set of forces than those suggested by the foreign investment literature. The results seem to indicate the importance of node-type factors such as the centrality of small firms in R&D activity and labour force stability, rather than the standard determinants such as incentives, labour costs and infrastructure. The implications and policy issues relating to the development of a node economy are discussed. FELSENSTEIN D. (1997) L'etablissement d'un noeud de technologie avancee: les entreprises a capital etranger du secteur de la technologie avancee en Isra�l, Reg. Studies 31, 367-380. Cet article presente le role du secteur de la technologie avancee en Isra�l en tant que noeud au sein d'un reseau de production mondiale. Un noeud se caracterise par l'ampleur des entrees et des sorties d'information, d'investissement et ainsi de suite, qui le traversent. L'investissement etranger constitue un indicateur de la situation centrale du noeud. A partir des cas d'etudes et des preuves globales au niveau de l'entreprise en ce qui concerne l'investissement direct americain dans le secteur de la technologie avancee en Isra�l, cet article met a l'epreuve l'hypothese que la participation etrangere a l'economie de noeuds est fondee sur un ensemble de facteurs qui se distinguent de ceux que proposent la documentation qui traite de l'investissement etranger. Il semble que les resultats laissent voir l'importance des facteurs du type 'nodal' telle la situation centrale des petites entreprises dans la R et D et dans la stabilite de la main-d'oeuvre, plutot que les determinants de base tels les incitations, les couts de la main-d'oeuvre et l'infrastructure On discute des retombees et des questions de politique relatives au developpement d'une 'economie de noeuds'. FELSENSTEIN D. (1997) Die Schaffung eines Hochtechnologieknotenpunkts; in ausla�ndischem Besitz befindliche Gesellschaften in der Hochtechnologie Israels, Reg. Studies 31, 367-380. Dieser Aufsatz fasst die Rolle des Hochtechnologiesektors Israels als die eines Knotenpunkts in einem globalen Produktionsnetz auf. Ein Knotenpunkt kann durch die Intensita�t ihn durchlaufender eingehender und abgehender Stro�me von Information, Investierungen usw. charaakterisiert werden. Investierungen des Auslands sind Indikatoren der Zentralita�tsbedeutung eines Knotenpunkts. Mit Hilfe von Beweismateial von Fallstudien und einem U�be...

Links Between Multinational Firms and Domestic Firms: A Comparison of the Software Industry in India, Ireland and Israel

“…MNCs' operations were very limited until the 1990s, and they accounted for about 1 per cent of total employment in the 1980s (Felsenstein, 1997). MNCs have established their activities in Israel to poach into the local pool of highly skilled personnel with low turnover rates and the local scientific and technological research in computing and IT security (De Fontenay and Carmel, 2001).…”

“…The first wave is made of MNCs which started their R&D operations in Israel to exploit the comparative advantage of this country in these activities (Felsenstein, 1997;Breznitz, 2003). Motorola and IBM were the first US firms to establish a R&D facility in Israel in the 1950s.…”

“…Intel set up a VLSI design centre in Israel in 1974 (Felsenstein, 1997 Like some recent R&D laboratories located in India, research activities conducted by MNCs in…”

“…Israel often play the role of nodes integrated in the corporate global network rather than being embedded in the local economic environment (Felsenstein, 1997; see Table 3 for a list of MNCs). The Israeli software industry is made of over 500 firms whose cumulative sales are about $4,100 million.…”

Innovation and the State—Development Strategies for High Technology Industries in a World of Fragmented Production: Israel, Ireland, and Taiwan

“…The OCS then assisted these limited partnerships with additional financing that was classified as loans for tax purposes, The story of Lannet and its end as Lucent's Israeli R&D center also symbolizes another trend that grew in importance in the 1980s, the R&D activities of hardware MNCs in Israel. The rise in the scope of MNCs' activities was so rapid that it caused a concern in Israel that the IT industry had become no more than a node in the MNCs' global activities, with most of the innovation and spillovers going overseas and with only few local spillovers (Felsenstein 1997 The group decided that although they were very well connected in Silicon Valley they would establish Mercury with the help of OCS grants in Israel. At first Mercurym following the well-trodden path for Israeli companies to focus on products assisting in R&D and software development developed a softwaredebugging tool.…”