High-Technology Industries as a Vehicle for Growth in Israel's Peripheral Regions

Abstract

This paper is a discussion of the subject of high-technology industrial development in peripheral regions. Findings from the literature are utilized to analyze critically the prospects for promoting high-technology industrial growth in Israel's peripheral regions. Alternative strategies for development are proposed. In section 2, the specific case of Israel, where the development of high-technology industries has recently been given high priority and attracting high-technology industries has been proposed as a viable strategy for promoting growth in peripheral regions, is discussed. This is presented in the context of the history of Israel's industrial development in general and of its high-technology industrial development policy in particular. In section 3, three alternative strategies for development policy are proposed, and the suitability of each to Israel is analyzed. The alternatives—the ‘Silicon Glen’ model, the specific area focus, and local-based development—all pursue strategies that sometimes contradict one another, sometimes overlap, and sometimes reinforce one another, thus generating the possibility of a fourth, and more optimal, policy strategy. In conclusion, it is not proposed that there exists a single policy strategy that could be claimed to be optimal for every peripheral region. Thus, no attempt is made to evaluate the superiority of one strategy alternative over another. This conclusion is reached after comparing the international literature to the case of Israel. It is apparent that high-technology industries are not necessarily always the best solution to the dilemmas of economic development in every region, particularly the ‘outer-ring’ border regions. A separate plan must be made for each peripheral region in light of its specific socioeconomic and locational characteristics. In drafting a regional development policy, planners must then deliberate whether or not high-technology industry is indeed likely to succeed in promoting regional economic growth.

Long-term growth of small towns in Israel: Does location matter?

“…The discussion has been focused on three main topics: a) housing and employment (Kipnis 1996;Lithwick and Gradus 2000;Razin and Shachar 1990;Shefer and Bar-El 1993); b) the ethnic makeup of population, immigration, and migration (Gradus et al 1993;Isralowitz and Friedlander 1999;Lipshitz 1993;Yiftachel 2000); c) development policies and planning (Altman and Rosenbaum 1975;Shachar and Razin 1985;Kark 1995;Kipnis 1996;Shmueli and Kipnis 1998;Gradus et al 1993). Altman and Rosenbaum (1975) attribute the failure of Israel's DTs to the limited range of social and economic opportunities they can offer to residents of surrounding semi-rural and rural communities, who largely bypass DTs in their search for services and facilities.…”

“…In his opinion, such towns reproduce 'patterns of deprivation and inequality' by creating low-status ethnic enclaves. Shefer and Bar-El (1993) attribute the failure of many DTs to the absence of a strong economic base, to an economically weak (mostly immigrant) population, and to the 'culture of dependency', responsible, in part, for the 'lack of entrepreneurship and innovation' in development regions. Lipshitz (1993) also attributes the sluggish economic growth of most DTs to the economic weakness of their population and to ineffective government policies.…”

“…Since the early 1970's, this policy was replaced gradually by various incentives designed to encourage both inward migration and private investment (Shefer and Bar El 1993;Shachar and Razin 1985;Kirschenbaum and Comay 1974). These incentives include favourable loans and government loan guarantees, tax exemptions, and the availability of public housing (Fialkoff 1992).…”

Local milieu and innovations: Some empirical results

“…The element of space can be overcome appreciably with adequate means of communication. Therefore, advanced means of communication are a necessary component in the process of diffusion of innovation, and hence in regional development and economic growth (Shefer and Bar-El 1993).…”

A meta-analysis of estimates of urban agglomeration economies

“…This is of particular interest since it can provide some insight on how the tendency of reduced transport costs and the use of information and communication technologies (ICT) may have affected the size of the returns to spatial agglomeration. A positive relationship between improved communication technologies and urban agglomeration economies have been found by Shefer (1988), Shefer and Bar-El (1993), and Gaspar and Glaeser (1998). The reference case includes the estimates of the elasticity of urbanization economies obtained using data for the 1960s.…”