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OM in the News: The High-Tech Clusters– Silicon Valley, Boston, Bangalore, and Israel

September 10, 2012

Pillcam endoscopic capsule

In our discussion of how companies select a site in which to locate (in Chapter 8), we bring up clustering, which is basically locating near competitors so as to take advantage of major resources found in that area. The perfect example is how software and high-tech firms head to Silicon Valley, Boston’s Route 123, and Bangalore (India). Here the talents of bright graduates in scientific and technical areas and plenty of venture capital are keys to success. Today’s Wall Street Journal  (Sept.10, 2012, pp. C5-C8) compellingly adds Israel to this list. Israel’s Minister of Finance ascribes much of its success to “government support of the robust venture capital industry, which is the accelerating spirit behind many start-up companies.”

Indeed the World Economic Forum’s Global Competitive Index just ranked Israel’s “availability of venture capital” 2nd in the world, “world-class capacity for innovation” 6th, and “high number of patents” 4th in world rank. The IMD World Competitiveness Yearbook lists Israel 1st for R&D expenditure (as % of GDP), 2nd for qualified engineers, 2nd for IT skills, 2nd for scientific research, 2nd for entrepreneurship, and 2nd for innovative capacity. The society, like the U.S., “puts entrepreneurs, successful or not, on pedestals, which allows them to attract the best minds to work with,” says one professor in Jerusalem. Included among the active sectors for innovators have been cleantech, agrotech, life sciences, communications technology, and security.

Here is the list of just some Israeli innovations: drip irrigation (1965), the Rummikub game (1977), voice mail (1984), multislice CD scanners and cardiac stents (1992), ICQ instant messaging, voice over internet VoIP), and the MS drug copaxone (all in 1995), USB flash drives and computer vision software for road navigation (1999), the pillcam (2001), and Intel mobile technology (2003). It follows that more than 50 Israeli firms are listed on NASDAQ–2nd only to the U.S.

Discussion questions:

1. Why do some countries have a much higher percent of scientists and engineers than other nations?

2. How does OM play a role in startup companies?

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