Barriers and Limitations in the Development of Industrial Innovation in the Region



21

more relevant these days with the doubt that had been raised recently in the Israeli Ministry of
Treasury on the necessity of the R&D grant policy, and the suggestion to cancellation or
reduction the level of support given by the government. The findings obtained from the
analysis in this study do not support this direction.

Farther more, no significant locational differences were found between the hi-tech firms in
accordance to the effect on the level of risk, development cost and the lack of financial
sources, on the ability of the firms to engage in innovation. Consequently there is not less
need in determining government policy to handle such barriers in the metropolitan area, than
in the peripheral regions. These findings also emphasis the great importance of the generous
R&D grants given by the government to start-up firms1, without any location aspect, and the
aid given to these firms in financing feasibility studies2.

Additionally, the result obtained from the analysis did not show significant locational
difference in the importance ascribed by hi-tech firms to the absence of highly skilled labor.
This barrier regarded as significant factor in hindering the engagement in innovation in any
region and not in particular in the periphery as could be expected.

In contrast, significant statistical difference was found in the importance ascribed by hi-tech
firm to the lack of market information, regarding to their location. This barrier towards
innovation were found particularly significant in the metropolitan area, yet it can be ascribed
to the highly engagement in innovation of the hi-tech firm in this region. Accordingly the
importance of government policy in sharing the exporters’ expenses by financing a marketing
infrastructure of varying scale raised3. Since the high-tech industry is export oriented, the
above aid track is most relevant for supporting the development of this industry.

of 50% of the expense of an approved R&D program. The R&D aid program has also a regional aspect, since
the fixed grant in peripheral areas is higher and accounts for 60% of the total expenses.

1 The 1984 law encouraging industrial R&D determines a special track for supporting R&D in such plants by
providing a larger grant (66%) of the eligible non-capital element of project cost, than to established plants
(50%).

2

Eligible grants are 50% of the total approved amount to conduct a feasibility study. The maximum budget is
$25,000-$30,000.

3 Participation in marketing expenses in 1/3 from the approved cost on building marketing infrastructure up to
maximum 50,000-400,000$, differs on a basis of exporter size.



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