1. General
This publication presents the results of two surveys dealing with research and development
(R&D) in the business sector for 2007:
a.
A survey of R&D in Computer and Related Services (Software) (Division 72), and in
Research and Development1 (Division 73), which also includes start-up companies,
technological incubators, and research institutes.
b.
A survey of R&D in Manufacturing (Divisions 13-39).
The surveys were conducted by the Central Bureau of Statistics, and commissioned by the
Ministry of Industry, Trade and Labor.
The survey of R&D in Manufacturing industries (henceforth: R&D in Manufacturing) was a
continuation of R&D surveys conducted in previous years. The survey examined an ongoing
sample of establishments, based on the population of establishments engaged in R&D
obtained from the 19972 Survey of Innovation; the list of establishments that applied for
funding from government sources and international foundations in 1997-2007; and all new
companies that became active. The data were classified by divisions listed in the Standard
Industrial Classification of All Economic Activities 19933, according to the main activity
of the establishment.
The survey on R&D in Computer and Related Services (Division 72) and in Research and
Development (Division 73) is aimed to measure the share of the companies in these
divisions in the expenditure on commercial R&D. The survey was conducted on a sample
identical to the one used in the previous year, with the addition of companies that received
funding from government sources and international foundations in the survey year, as well as
new companies that just began operating.
The aims of the R&D surveys included:
1. To estimate business expenditures on R&D, in order to calculate national expenditure on
R&D.
2. To produce a series of data on R&D that will make possible continuous evaluation of the
growth potential generated by technological innovations.
3. To provide the government, research institutions and other planning bodies with a tool to
guide research and development in Israel.
The first part of the publication presents data and indices on the Israeli economy and all
business R&D; the second part presents data on R&D in Computer and Related Services
(Division 72) and in Research and development (Division 73); and the third part presents
detailed data, by Manufacturing divisions (13-39). Parts 4-6 provide definitions and
1
It should be noted that in this publication, the term “Research and Development” (R&D) refers both
to the description of a given activity (as defined in the “Definitions and Explanations” section), as
well as to the name of Division 73 (in the Standard Industrial Classification of All Economic
Activities 1993, Second Edition. Technical Publication No. 63, Central Bureau of Statistics,
Jerusalem, 2003).
2
See Survey of Structure of Labour Force, Patterns of Work and Innovation in Manufacturing 1997,
Current Statistics 16, Central Bureau of Statistics, Jerusalem, 1999.
3
See the Standard Industrial Classification of All Economic Activities 1993, Second Edition.
Technical Publication No. 63, Central Bureau of Statistics, Jerusalem, 2003.
( 17 )
explanations, comments and enumeration results of the survey, and the seventh part is
dedicated to an international comparison of the main indices.
In the past, R&D surveys were published in Special Publications and Current Statistics series.
Updates
All the companies participating in the R&D Survey were reexamined and reclassified
following the recommendations of the Helfman Commission1, which convened in 2005, in
order to characterize and define the national expenditure on civilian R&D, as part of an
ongoing effort to adapt the series of data to international definitions that will provide a basis
for international comparisons. The classification was revised retroactively as of 2003, and as
a result, there is a discrepancy between data series for the period up to 2002, and data
series for the period from 2003 onwards. Data from the previous series for 2003 and 2004
are presented in Appendix A.
2. Main Developments in the Israeli Economy and the Inputs in Science
and Technology which Make R&D Possible (Enablers)
2.1 Main Trends in the Israeli Economy
2007 was a growth year in the Israeli economy, until the beginning of the financial crisis of
2008. The GDP rose by 5.6%2, the business product rose by 6.2%, and investments in the
economy grew by 12.0% - the sharpest rise in 16 years. The manufacturing production index
(Diagram 1) rose by 4.5%, continuing the ongoing improvement in this index since 2004 –
which points to an annual average change of 6.0% during 2004 - 2007. An improvement
occurred in all the technological intensities of manufacturing, with the medium-high
technology industries having the greatest change – a rise of 8.9% in the production index.
1. MANUFACTURING PRODUCTION INDICES,
BY TECHNOLOGICAL INTENSITY
Base: 2004=100.0
2004-2007
Indices
140
High technology
130
Medium-High technology
120
Medium-Low technology
110
Low technology
100
2004
Total Manufacturing
2005
2006
2007
Source: Manufacturing Indices - Annual Summaries, 2007, CBS.
1
The recommendations appear in the Report of the Committee for Characterization and Definition of
National Expenditures on Civilian R&D, which was submitted to the TELEM (National
Infrastructures for Research and Development) Forum in April 2005.
2
Chained at fixed prices.
( 18 )
A rise was also recorded in the number of jobs in manufacturing - which rose by 3.9%, and in
wages – which rose by 3.5%. In the high-technology industries total jobs rose from 87,100 in
2006 to 92,200 in 2007, and the wages for an employee job rose by 3.0%.
2. JOBS IN MANUFACTURING, BY TECHNOLOGICAL INTENSITY
Base: 2004=100.0
2004-2007
120
High technology
Indices
115
Medium-High technology
Medium-Low technology
Low technology
110
Total Manufacturing
105
100
2004
2005
2006
2007
Source: Manufacturing Indices - Annual Summaries, 2007, CBS.
ICT industries1 are the leading industries in R&D activity in Israel, and constitute 88.0% of
total R&D expenditure in 2007. The activity in these industries significantly influences the
R&D activity in the economy. These industries retain their relative share of the business
product (16.0%), and present growth in their activities in 2007; with the GDP of the ICT
industries growing by 5.0%, and continuing the growth trend of an annual average of 9.0%
during 2004-2007.
150
3. DEVELOPMENT OF GDP IN THE ICT SECTOR AND IN THE BUSINESS
SECTOR
Base: 2004=100.0
2001-2007
Indices
140
130
120
110
100
90
2001
2002
2003
2004
Business sector
2005
ICT
Source: Information and Communication Technologies Industries, CBS.
1
A definition of ICT industries appears in Appendix B.
( 19 )
2006
2007
The backdrop to the Israeli economy’s growth is the continuing growth trend of the global
economy: the rate of growth of the GDP in the US stood at 2.2% and in the OECD countries
at 3.5%. This growth was reflected in a rise in the demand for Israeli exports; manufacturing
exports grew by 16.8% this year, and exports of high-technology industries rose by 11.5%.
2.2 Inputs into Science and Technology (Enablers)
The improvement in the global economy resulted in investors who are searching for
opportunities of capital investment in the global economy, which is reflected in recruitment of
capital and investments from foreign sources in Israel. In 2007 foreign residents invested
approximately US$ 10 billion in Israel. Although this is a drop compared with 2006, but in
addition, a rise of 8% occurred in financing by venture capital funds and other foreign
sources, who are active in Israel and constitute an important source of financing for start-up
companies. These sources constitute a financing agglomeration and serve as an indicator of
activity in the field of creating knowledge, technology and products. Financing originating in
venture capital funds especially indicates a development in the number of companies
developing innovative technologies.
4. DIRECT CAPITAL FORMATION OF FOREIGN RESIDENTS IN ISRAEL
(CURRENT PRICES)
2003-2007
16,000
Million Dollars
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2003
2004
2005
2006
2007
Source: National Accounts, CBS.
Companies receive most of their financing from venture-capital funds and other foreign
sources (38%) during the mid-development stage, although there was a drop of 1%
compared with 2006. There is great importance attached to the financing given to companies
in the early R&D stages (Seed stage), in which the companies are faced with difficulties in
recruiting financing due to the high risks involved in investments of this type. In 2007 these
companies received US$ 708 million from venture-capital funds and other foreign sources, a
rise of 12% compared with 2006.
( 20 )
Table 1.- Investments by Foreign Sources and Venture Capital
Funds in Israeli Start-Up Companies, by Stage of Development
In millions of dollars, unless specified otherwise
Investment stage
2004
2005
2006
2007
2008
1,465
1,337
1,622
1,759
2,076
45
-9
21
8
18
Seed money investments
108
110
138
151
104
Early R&D investment
361
372
496
557
755
Mid stage investments
819
702
675
668
780
Late revenue growth
177
15
313
383
437
Total
Annual change (in percentages)
Source of data: IVA Research Center.
To these sources are added NIS 1.15 billion that originate in government sources and
international foundations, and which constitute a rise of 7.0% in this sum compared with
the previous year. Despite the growth, the sharp rise in expenditures on business R&D
caused a drop in the rate of financing down to 4.0% of the total R&D expenditure, compared
with 4.5% in 2006.
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Yearly Percentage of
Change in Total
Funding (right axis)
Total
10
5
0
-5
-10
-15
-20
Percentages
NIS Millions
5. FINANCING FROM GOVERNMENT SOURCES AND
INTERNATIONAL FOUNDATIONS
(CURRENT PRICES)
2003-2007
2003-2007
Research and
Development division
-25
2003
2004
2005
2006
2007
Computer and Related
Services division
In addition to the rise in activity and financing sources, a rise was observed in the supply of a
labour force with skills and education, which is the main input in R&D. In 2007 approximately
46,000 people in Israel became entitled to a first degree and other advanced degrees, of
( 21 )
which 12,100 were in the fields of science and technology1; they joined 123,000 degree
graduates of 19952; of which 663 are entitled to third degrees.
Table 2.- Degree Graduates in the Fields of Science and Technology, by Field
2007
Type of Diploma
Total
st
nd
1 and 2 degree
Ph.d.
Total
graduates
since
1995
Total
graduates in
2007
Mathematics,
Statistics and
Computer
Sciences
Physical
Sciences
Biological
Sciences
Agriculture
Engineering
and
Architecture
123,171
12,083
2,412
1,318
2,508
445
5,399
1164,39
114,19
94319
141,9
94912
,0,
24306
6,732
663
93
1,6
993
33
93
Source of data: Higher Education and Teaching Staff Sector.
The positive trends in the global and Israeli economies, and the continuing rise in
investments and degree holders, provide an environment that supports R&D activity in Israel.
2.3 The national expenditure on civilian R&D
In 2007 the national expenditure on civilian R&D stood at NIS 30.5 billion (in 2005 prices),
which constitutes a rise of 11.2%, with the main growth of expenditure resulting from a rise in
the share of the business sector; and the shares of the government and higher education
sectors not changing significantly3 (for further details, see National Expenditure on Civilian
Research and Development 1989-2007, Publication No. 1352, Central Bureau of Statistics,
Jerusalem, 2009).
2.4 Research and development in the business sector
Business Enterprise Expenditure on R&D (BERD)4 in 2007 (at 2005 prices) totaled NIS
24.4 billion, a rise of 14% - the highest rise since 1999. this increase continues the growth in
expenditure on R&D conducted by businesses (BERD), which has occurred since 2004.
During 2003-2007 the expenditure grew at an annual average rate of 5.4%.
1
The international definition of the fields of science and technology includes the fields appearing in
Table 2.
2
It should be noted that the data for the total number of graduates since 1995 who appear in Table 2
includes duplication of second-degree graduates who completed their first degree in the past, and
similarly, third-degree graduates, although the duplication is not complete and therefore was not
subtracted from the data.
3
A rise of 5% was observed in the R&D conducted by non-profit institutions, but their relative share
of the total expenditure on civilian R&D is insignificant.
4
BERD: this is an index of the expenditure on R&D conducted by businesses. This expenditure
includes the total expenditure on inputs, minus payments to external factors for purposes of
conduction R&D, and plus investments in fixed assets for R&D purposes.
( 22 )
6. BUSINESS ENTERPRISE EXPENDITURE ON R&D (BERD)
(2005 Prices)
2003-2007
16
30
24
12
10
18
8
12
6
4
NIS Billions
Percentages
14
6
2
0
0
*2003
2004
2005
Percentage of Change
2006
2007
BERD
* There is no datum for percentage of change in 2003.
As noted in the Preface, the survey population includes the Manufacturing industries (13-39),
the Computer and Related Services industry (72) and the Research and Development
industry (73). In 2007 the main share of expenditure on R&D conducted by businesses
(BERD) – 37.0% of the total expenditure – was incurred by the R&D industry (73).
Businesses in the Manufacturing industries incurred 34.0% of the total expenditure, with
high-technology industries incurring 28.7% of the total expenditure on R&D conducted by
businesses, and 84.0% of the total expenditure being incurred by the Manufacturing
industries (13-39). The Computer and Related Services industry (72) constitutes 29.0% of
the total expenditure.
7. DISTRIBUTION OF EXPENDITURE ON R&D PERFORMED BY
BUSINESSES, (2005 PRICES)
2007
Medium-High
Medium-Low
Technology
High Technology
Technology
3.0%
28.7%
2.1%
Other
2.4%
Research and
Development
37.0%
Low Technology
0.3%
Computer and
Related Services
28.9%
( 23 )
Human capital is the main production factor in R&D, and therefore the main expenditure item
in R&D is the cost of labour. In 2007 the cost of labour constituted 59% of the total R&D
expenditure. The cost of labour grew by 18% compared with 2006, and stands at NIS 15.5
billion in fixed prices.
As can be seen in Diagram 8, the average cost of labour for a full-time position is NIS
329,000, a rise of approximately 6% compared with 2006, following a rise of 3% in 2006
compared with 2005. Concurrently with the rise in the cost of labour, the number of positions
that deal with research and development also rose.
8
340
6
320
4
300
2
280
0
260
-2
240
2003
2004
2005
2006
NIS Thousands
Percentages
8. AVERAGE LABOUR COST FOR A FULL-TIME EQUIVALENT JOB
(CURRENT PRICES)
2003-2007
2007
Average Labour Cost (Right axis)
Percentage of Change
In large companies the average cost of labour for a full-time position rose by 10%, and in
companies with 500 and more employed persons the cost of labour rose by 15%. The large
companies spend an average of approximately 50% more for a full-time position than small
companies, who employ up to 20 employees. However, in medium companies employing up
to 50 employed persons, a drop of 4% in the cost of labour for a full-time position was
observed in 2007.
Table 3 – Cost of Labour per Full-Time Position by Size of
Company, Average
Total
5-19
20-49
50-249
250-499
500+
2005
2006
302
224
232
310
344
336
NIS Thousands
310
234
261
289
350
358
( 24 )
2007
329
213
252
311
351
411
Change between
2006 and 2007
Percentages
6
-9
-3
7
0
15
In 2007 a rise of 14% was observed in investments in fixed assets intended for R&D in
fixed prices, after a rise of 12% in 2006. These investments constitute the future
infrastructure for R&D activity, whether in an expansion of R&D activities or in an
improvement in the technology and an expansion of the technological diversity. The main
contribution to the rise of investments results from investments by Manufacturing industries,
which grew by NIS 123 million compared with the amount invested in 2006.
1,600
9. FIXED CAPITAL FORMATION FOR R&D
( 2005 PRICES)
2003-2007
NIS Millions
1,400
1,200
1,000
800
600
400
200
0
2003
2004
2005
2006
2007
Total
Manufacturing divisions
Computer and Related Services division and Research and Development division
The number of jobs engaged in R&D rose by 13%, from 50,000 positions in 2006 to 57,000
positions in 2007. The number of FTE (full-time equivalent) jobs engaged in R&D grew at a
similar rate (14%), from 44,000 to 51,000 full-time jobs. As a result a miniscule (1%)
improvement was observed in the relative share of full-time jobs, out of the total jobs
engaged in R&D.
The share of women employed in jobs that engage in R&D stood at 23%, and a rise of 7%
was observed in the total number of jobs for women in jobs of this type, as a result of a
moderate rise compared with the total of all jobs that engage in R&D.
( 25 )
10. JOBS RELATED TO R&D
2004-2007
60
15
40
10
30
20
5
Percentages
Thousands
50
10
0
0
2004
2005
2006
2007
Percentage of Change in Full-Time Equivalent Jobs (right axis)
Total Jobs
Full-Time Equivalent Jobs
The revenue among companies that engaged in R&D in 2007 stands at NIS 153.7 billion (at
2005 prices), a rise of 18% compared with 2006.
11. REVENUE OF FIRMS ENGAGED IN R&D
(2005 PRICES)
2003-2007
180,000
82
160,000
NIS Millions
120,000
78
100,000
80,000
76
60,000
40,000
Percentages
80
140,000
74
20,000
0
72
2003
2004
2005
Rate of Export out of Revenue
2006
2007
Revenue
Company exports in 2007 rose at a similar rate as the growth in revenue, and its share of the
revenue remained 80%, similar to that of 2006. The main demand for advanced knowledge
and products is found in markets abroad, and in recent years the share of revenue resulting
from exports by companies engaged in R&D has grown. In 2005 exports grew by 5%
compared with a growth of 1% in revenue; a trend that continued in 2006, as well, although a
slowdown can be observed in the growth of exports in 2007. The strong competition that
exists in the markets of the global economy constitutes an incentive for innovation, one of
whose expressions and generators is research and development.
( 26 )
Percentages
12. ANNUAL PERCENTAGE OF CHANGE IN REVENUE AND EXPORT
OF FIRMS ENGAGED IN R&D
( 2005 PRICES)
2004-2007
20
18
16
14
12
10
8
6
4
2
0
2004
2005
2006
2007
Rate of Change in Revenue
Rate of Change in Export
Introduction table 4 presents export’s share of revenue by size of expenditure on research
and development spent by businesses (BERD). Despite the fact that the differences between
the groups is low (except for companies that spend up to NIS 5 million), it can be seen that
the expenditure on R&D spent by businesses (BERD) grew with the rate of export, and vice
versa. R&D centers of multi-national companies are not included in the data in Introduction
table 4, because these centers are characterized by a high rate of export. The revenue of
these R&D centers derives overwhelmingly from sales of R&D to the parent company;
therefore, their inclusion will cause an upward bias.
Table 4 – Rate of Export by Size of Expenditure on R&D
(BERD), at 2005 Prices
Percentages
BERD Expenditure on
R&D (BERD) NIS
millions
Rate of export out of revenue
9002
9006
900,
Up to 5
47
61
61
5 to 20
88
84
83
20 to 50
90
86
91
50 and more
89
90
90
2.5 R&D expenditure and financing by geographical location
The main R&D activity in Israel is concentrated in the center of the country. In 2007 the R&D
expenditure in Tel Aviv and the rest of the central localities totaled NIS 17.6 billion, which
constitutes 62.6% of the total R&D expenditure. However, the R&D expenditure in the
southern localities is sparse – the total R&D expenditure in this area in 2007 totaled only NIS
679 million, which is 2.4% of all R&D expenditure. The share of employed persons in
( 27 )
companies engaged in R&D in the southern area, out of all employed persons in companies
engaged in R&D, is much more significant – 9.6%. The gap partially derives from the fact
that most companies engaged in R&D in the south belong to the manufacturing industries
that are characterized by a low ratio of R&D workers to total workers (tables 5, 6).
Percentages
40
13. DISTRIBUTION OF EXPENDITURE ON R&D, FINANCING FROM
GOVERNMENT SOURCES AND INTERNATIONAL FOUNDATIONS AND JOB
DEALING IN R&D, BY DISTRICT
2007
35
30
25
20
15
10
5
0
Jerusalem
Northern
Central
Haifa
Tel Aviv
Southern
District
Total Jobs Engaged in R&D
Expenditure on R&D
Financing from Government Sources and International Foundations
2.6 Manner of listing of research and development expenditure
In the survey questionnaire the companies are requested to reply to questions regarding the
internal structure of the company, and the manner of listing R&D expenditure. These
questions make it possible to estimate the quality of the data and their source; e.g.,
companies who conduct a separate account of R&D expenditure in their files, do not need to
separate these data retroactively especially for the questionnaire, and therefore the quality of
the data rises. That is also true of separate R&D units, regarding everything related to
identifying R&D activity out of the total company activity. In 2007 approximately 87% of all
companies reported a separate R&D unit. These companies reported an R&D expenditure of
NIS 25.2 billion, which is 90% of the total R&D expenditure.
Table 5 – Separate Unit and Manner of
Listing R&D Expenditure
2007
Percentages
Total
Yes
No
Total
Separate R&D unit
Separate listing of R&D
expenditure
87.3
12.7
100.0
90.4
9.6
100.0
( 28 )
90% of the companies reported that they conduct separate accounts for R&D in the
accounting system of the company (88% of all companies responded to the question on the
manner of listing R&D expenditure).These companies reported an expenditure of NIS 23.5
billion on R&D, which constitute 84% of all R&D expenditure.
3.
Computer and Related Services (Division 72) and Research and
Development (Division 73) (Start-Up Companies, Technological
Incubators and Research Institutes) - Main Findings
3.1 Jobs in Research and Development
In 2007 there were 103,000 jobs in Computer and Related Services (Division 72), and in
Research and Development (Division 73) (including startup companies, technological
incubators and research institutes). Of those jobs, 58,300 were in companies engaged in
research and development. This is an increase of 14% compared with 2006, following a rise
of 4% in 2006 compared with 2005. In 2007, 37,300 jobs were recorded in R&D, out of all
jobs in companies engaged in R&D – an increase of 17% compared with 2006, in which
32,000 jobs were recorded (table 9). In 2007, the number of full-time jobs amounted to
33,100, an increase of 15% compared with 2006. This rise is more moderate than the rise in
the number of jobs in R&D; therefore, there is a drop of 1 percentage point in the share of
full-time jobs out of the total number of jobs in R&D (89% in 2007). As noted, the number of
full-time jobs in R&D was less than the total number of jobs, because some of the jobs in
R&D were part-time positions (for a detailed explanation, see Section 5).
16
35
14
30
12
25
10
20
8
15
6
10
4
5
2
0
0
*2003
2004
2005
2006
Annual Percentage of Change in Full-Time Equivalent Jobs
Third Degree or Higher
First and Second Degrees
Total Jobs in R&D
Full-Time Equivalent Jobs
* There is no datum for percentage of change in 2003.
( 29 )
2007
Percentages
Thousands
40
14. JOBS IN COMPUTER AND RELATED SERVICES DIVISION AND IN
RESEARCH AND DEVELOPMENT DIVISION
2003-2007
3.2 Expenditures on Research and Development
In 2007, expenditures on R&D totaled NIS 17.8 billion in Computer and Related Services
(Division 72) and in Research and Development (Division 73), an increase of 23.0%
compared with 2006 (NIS 14.5 billion) (Table 1)
In Computer and Related Services (Division 72), expenditures on R&D totaled NIS 7.6
billion, a rise of 21.4% compared with 2006 (NIS 6.2 billion). In 2007, 27.0% of the total
expenditure on business R&D were in that division, in 2006 26.2% of the total expenditure on
business R&D were in that division, and in 2005 28.2% of the total expenditure on business
R&D were in that division (Table 10).
In Research and Development (Division 73), expenditures on R&D totaled NIS 10.2 billion
in 2007, an increase of 24.0% compared with the total expenditures in that division in 2006
(NIS 8.3 billion). Over the past decade, expenditure on R&D in the Research and
Development division increased each year compared to the previous year. This trend is
indicative of development and expansion of the division, which comprised 36.5% of the total
expenditure on business R&D in 2007, compared with 16.0% in 1997 (Table 10).
18
16
14
12
10
8
6
4
2
0
12.2
Total Expenditure on
R&D in Computer and
Related Services
Division
12.1
7.3
7.2
5.2
2007*
2006*
2005*
2004*
2003*
2002
2001
2000
1999
1998
5.0
1997
NIS Billions
15. TOTAL EXPENDITURE ON R&D IN COMPUTER AND RELATED
SERVICES DIVISION (72) AND IN RESEARCH AND DEVELOPMENT
DIVISION (73)
Total Expenditure on
(2005 PRICES)
R&D in Research and
1997-2007
Development Division
Total Expenditure on
R&D in Research and
Development Division
and in Computer and
Related services
Division
* As of 2003, divisional updates and revisions have been made for firms in the survey. For more details see Appendix A.
In 2007, 71.6% of the total expenditures on R&D in Computer and Related Services (Division
72) and approximately 59.4% of the total expenditures in Research and Development
(Division 73) were in the category of “Labour Cost”. Similar data were observed in 2006
(71.8% and 57.6%, respectively). In 2007, the item “payments to external elements”
comprised 9.6% of the total expenditures on R&D in Research and Development (Division
73), and 7.4% of the total expenditures in Computer and Related Services (Division 72),
compared with 8.9% and 5.8%, respectively, in 2006. In 2007, there was a rise of 55.4% in
the total payments to external elements in Computer and Related Services (Division 72)
compared with 2006 (Table 10), after a drop of 29.8% between 2006 and 2005.
( 30 )
3.3
Companies in Computer and Related Services (Division 72) and in
Research and Development (Division 73) receiving financing from
government sources and international foundations
In 2007, financing from government sources and international foundations in Computer and
Related Services (Division 72) and in Research and Development (Division 73) totaled NIS
691 million, which constituted 3.9% of all expenditures on R&D in those divisions; compared
with NIS 598 million, which constituted 4.1% of the total expenditure on R&D in those
divisions in 2006. In 2007, an increase of approximately 15.5% was recorded in financing
from government sources and international foundations; in 2006 a more moderate rise of
2.8% was observed, after a drop of approximately 22.6% in 2005, and after two years, in
which financing dropped from NIS 948 million in 2003 to NIS 582 million in 2005, a drop of
38.6% (Table 12). In 2007, there were approximately 10,600 jobs in R&D at companies
financed by government sources and international foundations – 28.0% of the jobs in R&D at
all companies in Computer and Related Services (Division 72) and in Research and
Development (Division 73). In 2007, 27.0% of the total expenditures on R&D were made by
companies that receive funding from government sources and international foundations – a
decrease compared with 35% in 2006. In 2007, exports of companies that receive funding
from government sources and international foundations constituted 24.0% of all exports of
R&D establishments, compared with 33.0% in 2006. It should be noted that the group of
companies receiving financing from government sources and international foundations
include different companies each year (for additional data on those companies, see Tables
12 and 13).
Table 6.- R&D in Computer and Related Services (Division 72)
and in Research and Development (Division 73)
2007
Percentages
Total
Companies that received
financing from government
sources and international
foundations
Jobs in R&D
Jobs for academic
professionals in R&D
100.0
28.4
Companies that did not
receive financing from
government sources
and international
foundations
71.6
Companies’ revenue
Expenditure on R&D
100.0
100.0
28.4
22.8
27.4
71.6
77.2
72.6
50.0
60.1
47.0
100.0
23.6
76.4
85.4
88.6
84.5
3.9
14.1
-
Percentage of R&D expenditure out
of total revenue
Exports
Percentage of export out
of revenue
Percentage of financing from
government sources and
international foundations, out of
total expenditure on R&D
100.0
( 31 )
Table 7.- Financing from Government Sources
2007
Financing
from
government
sources and
international
foundations
(Thousands)
Relative
share of the
division in
financing from
government
sources and
international
foundations
(Percentages)
Total
expenditure
for R&D
(Thousands)
Percentage of
expenditure
financed by
government
sources and
international
foundations
(1)
B/A
(3)
(1)/(3)
A Total
691
100
B Division 72
Division 73
246
444
17,822
3.9
36
7,576
3.2
64
10,246
4.3
Like the expenditure on R&D, financing from government sources and international
foundations in those industries is centralized. Introduction table 8 shows that 10 companies
received 15% of the total funding from government sources and international foundations,
although their expenditures comprised only 5% of the total expenditure on R&D, and only 3%
of all jobs in R&D were in those companies. 50 companies received 41% of the total funding
from government sources and international foundations, although their share of the total
expenditure on R&D was 14%, and 11% of all jobs in R&D were in those companies. The
relatively small share of companies that were financed by government sources and
international foundations can be attributed to several factors: the centralized structure of the
markets in those divisions, and the centralized expenditure on R&D that results from that
structure, which derives from the fact that the R&D centers that engage in a substantial
percentage of R&D in the Computer and Related Services and Research and Development
divisions are characterized by low levels of financing due to the criteria for receipt of grants.
Table 8.- Centralization of Financing from Government Sources and
International Foundations
2007
Total
Total
financing
expenditure
from
for R&D
government
sources and
international
foundations
Total jobs in
companies
engaged in
research and
development
Share of
Share of
Share of
companies in companies in companies in
total financing expenditures total jobs in
from government
for R&D
companies
sources and
engaged in
international
research and
foundations
development
NIS Millions
Thousands
Percentages
10 companies
101
821
1.8
15
20 companies
5
3
167
1,648
3.4
24
50 companies
9
6
283
2,564
6.2
41
14
11
( 32 )
3.4
Goals of R&D Projects in Computer and Related Services (Division 72)
and in Research and Development (Division 73)
In the 2007 R&D Surveys, as in previous years, the companies in the survey were requested
to categorize their projects and products according to their level of innovation. In 2007, 66%
of the projects in Research and Development (Division 73) were intended to develop new
products. Of those projects, 67% were intended to develop a new product in the world.
Introduction table 9 shows that only 29% of all projects in Israel intended to develop new
processes were new in the world.
Table 9.- Innovation and Product of Projects in Research and Development
(Division 73)
2007
Percentages
Innovation of the project
Product of the Project
New in
the world
New in
Israel
New in
the
company
Total innovation of
project
Total product of
project
Total
55
6
39
100
100
Improve
existing
product
30
13
57
100
17
New process
29
9
62
100
17
New product
67
4
29
100
66
The companies in Computer and Related Services (Division 72) were also asked about the
goals of their projects. The findings revealed that in 2007, most of the projects
(approximately 62%) that were based on new technologies were intended for development of
shelf products; 30% of the projects were intended for development of a “tailored” software
product (intended for a specific client), with technological innovation that contributes to the
basic product of the company; and 8% of the projects were intended for the company’s
internal use.
3.5
Foreign-Owned Companies and Development Centers of International
Companies in Computer and Related Services (Division 72) and in
Research and Development (Division 73)
The high level of innovation and creativity in the industries that engage in R&D draws foreign
companies and investors to Israel. In 2007, foreign-owned companies operating in Israel
spent NIS 11.4 billion on R&D, which comprised approximately 63.8% of the total R&D
expenditure in Computer and Related Services (Division 72) and in R&D (Division 73),
compared with 66.5% in 2006. Approximately 20,100 jobs were in foreign-owned companies,
which constituted 53.9% of all jobs in those two divisions. R&D development centers, that
operated within the foreign-owned companies, made approximately 69.2% of the total
expenditures on R&D in those companies, and approximately 62.2% of the jobs in R&D were
( 33 )
in those centers. The percentage of financing from government sources and international
foundations in these companies was low - only 1.2% of the total expenditure and investments
in R&D (compared with 1.6% in 2006), apparently due to the restrictions imposed on
recipients of funding. In contrast, in 2007 financing from government sources and
international foundations in companies under Israeli ownership amounted to approximately
7.0% of the total expenditure and capital formation in R&D, compared to 8.4% in 2006. In
2007, foreign-owned companies invested an average amount of approximately NIS 637,000
for each full-time job in R&D – 1.3 times the amount invested by Israeli-owned companies,
who spent an average of NIS 473,000 for each full-time job in R&D. In contrast, the revenue
per full-time job in R&D in foreign-owned companies was 7.0% lower, owing to the influence
of the R&D centers, where revenue is on a cost-plus basis.
Table 10.- Selected Data, by Type of Ownership of Companies Engaged in R&D
2007
Jobs in R&D (thousands)
Total Thereof:
Full-time
jobs
(NIS Millions)
Thereof:
Total R&D Investments Financing Revenue Exports
Jobs for Expenditure in R&D
from
academic
government
professionals
sources and
international
foundations
29.7
17,822
910
691 35,679
30,483
Total
37.3
33.1
Israeli-owned
17.2
14.3
12.9
6,451
313
472 16,048
12,839
Foreign-owned
Thereof:
Development
centers of
international
companies
20.1
18.8
16.9
11,371
597
219 19,631
17,644
12.5
11.4
10.8
7,872
361
23
9,974
9,920
The skills possessed by workers in Israel draw many international companies to the country.
These companies establish development centers, which they use only as R&D units. Most of
the centers are concentrated in Computer and Related Services (Division 72) and in
Research and Development (Division 73), and their activity is a significant component of total
R&D activities in Israel. In 2007, R&D centers spent approximately NIS 7.9 billion on R&D
activity, which comprised approximately 28.0% of the total expenditure on business R&D,
and approximately 44.2% of the total R&D expenditure in Computer and Related Services
(Division 72) and Research and Development (Division 73); compared with 28.5% and
46.7% in 2006, respectively. There were a total of 12,500 R&D jobs in the R&D development
centers, which constituted 22.0% of all jobs in business R&D, and 33.5% of the jobs in R&D
in Computer and Related Services (Division 72) and Research and Development (Division
73), compared to 23.1% and 36.3%, respectively in 2006. In 2007, R&D development center
exports comprised approximately 99.5% of the total revenue of those centers, whereas
exports of all companies engaged in R&D activities in Computer and Related Services
(Division 72) and Research and Development (Division 73) comprised approximately 85.4%
of the total revenue. The reason for this gap is, as stated, the cost plus based revenue from
the parent company in the development centers. It should be noted that the development
( 34 )
centers of international companies receive almost no funding from government sources and
international foundations. In 2007, financing from those sources comprised only
approximately 0.3% of these centers’ total expenditures for R&D, and their share of financing
for R&D in Computer and Related Services (Division 72) and Research and Development
(Division 73) was only 3.3%.
Table 11.- Development Centers of International Companies – Selected Data
2007
Millions, unless otherwise specified
Total jobs in
R&D
(thousands)
Total R&D centers
of companies
Total expenditure
on R&D
Wages
Revenue
Exports
Financing from
government
sources and
international
foundations
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
11.6
12.5
6,770
7,872
4,362
5,385
10,513
9,974
9,020
9,920
16
23
4.7
6.7
2,497
3,390
1,759
2,503
2,968
4,383
2,958
4,329
12
23
6.19
5.8
4,273
4,482
2,603
2,882
7,545
5,591
6,063
5,591
5
0
32.0
37.3
14,504 17,822
9,238
11,514 37,462 35,679 31,713 30,483
598
691
Thereof:
R&D centers of
international
companies in
Computer and
Related
Services
(Division 72)
R&D centers of
international
companies in
R&D (Division
73)
Computer and
Related Services
(72) and R&D (73)
4.
Survey of Research and Development in Manufacturing (Divisions
13-39) - Main Findings
4.1 Jobs in R&D in Manufacturing
In 2007, there were 19,500 jobs in R&D. Of those, 17,700 were jobs for academic
professionals and practical engineers and technicians, compared with 18,300 and 16,600,
respectively, in 2006.
In 2007, 4,600 women had jobs in R&D. Of those, 3,800 were jobs for academic
professionals, practical engineers and technicians, compared with 4,500 jobs for women in
those fields in 2006. These data reflect an increase of 2.2% in 2007, after a rise of 15.4% in
2006 compared with 2005.
In 2007, more than 80.0% of all jobs of academic professionals, practical engineers and
technicians who engaged in R&D in all the enterprises in manufacturing were concentrated in
the following industries: “Manufacture of industrial equipment for control and supervision,
medical and scientific equipment” (34) – 36.3%; “Manufacture of electronic communication
equipment” (33) – 28.7%; “Manufacture of machinery and equipment”, “Manufacture of
( 35 )
transport equipment” (29, 35) – 7.2%; “Manufacture of refined petroleum and its products
and nuclear fuel”, “Manufacture of chemicals and chemical products (23, 24) – 8.7% (Table
16).
61% of all jobs in enterprises engaged in R&D in 2007 were in enterprises in the private
sector, compared with 59% in 2006 (57%).
56% of all jobs of workers in R&D in 2007 were in enterprises in the private sector, compared
with 59% in 2006 (Table 18).
16. JOBS ENGAGED IN R&D IN MANUFACTURING
1990-2007
15.1
15
14.3
10.4
10
9.8
5
3.5
Jobs in R & D
Academic Professionals
Practical Engineers and Technicians
Others
2007*
2006*
2005*
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
2004*
1.4 3.2
1.3
2003*
Thousands
20
* As of 2003, divisional updates and revisions have been made for firms in the survey. For more details see Appendix A.
In 2007, there were 16,600 jobs for academic professionals, practical engineers and
technicians in R&D in large establishments1, compared with 14,800 in 2006. The total
number of jobs in large manufacturing establishments (including jobs of workers with no
academic or technical education) constituted 93.8% of all jobs in R&D in Manufacturing,
compared with 88.8% in 2006 (see Table 15).
1
Establishments with 50 or more jobs.
( 36 )
17. INDEX OF CURRENT EXPENDITURE ON R&D IN MANUFACTURING
(ENTERPRISES WITH 50 JOBS OR MORE)
BASE 2005 = 100.0
1997-2007
140
Indices
120
100
80.2
80
78.1
60
40
20
0
1997
1998
1999
2000
2001
2002 2003* 2004* 2005* 2006* 2007*
* As of 2003, divisional updates and revisions have been made for firms in the survey. For more details see Appendix A.
4.2 Total Expenditure on R&D in Manufacturing
In 2007, expenditure on R&D in all manufacturing establishments amounted to NIS 10,283
million at current prices, of which NIS 9,759 million (94.9%) was spent by the large
establishments. In 2006, the expenditure on R&D in all manufacturing establishments
amounted to NIS 9,280 million in current prices, of which NIS 8,874 million (95.6%) was
spent by the large establishments.
Expenditures on R&D in manufacturing establishments also include generic research and
development activities at the manufacturing establishments (through consortiums – see
Section 5, “Terms, Definitions and Explanations”).
The “Labour Cost” component constituted approximately half of the expenditure on R&D in
all establishments conducting R&D in Manufacturing between 1999 and 2007.
In 2007, “Other Expenses Including Overhead” constituted approximately 24.7% of the total
expenditure on R&D, compared with 25.7% in 2006. Expenditure on materials and energy for
R&D constituted 8.8%, compared with 9.4% in 2006; and expenditure on R&D commissioned
from elements outside the establishment (such as research institutes and other institutions)
constituted approximately 16.5% in 2007, compared with 15.7% in 2006 (Table 16).
In the large establishments, the distribution of expenditure on R&D was similar to that
recorded in all manufacturing establishments engaged in R&D.
( 37 )
18. DISTRIBUTION OF EXPENDITURE ON R&D IN VARIOUS
MANUFACTURING DIVISIONS
2007
Other Divisions
Electric motors and
5.3%
electric distribution
apparatus
1.6%
Electronic
communication
equipment
29.9%
Industrial
equipment for
control and
supervision,
medical & scientific
equipment
32.0%
Chemicals,
chemical products
& refined petroleum
17.8%
Machinery and
equipment,
transport equipment
8.5%
Electronic
components
4.8%
Manufacturing exports of the establishments engaged in R&D in 2007 amounted to NIS
112.3 billion in 2007, which constituted 82.3% of the total Manufacturing exports, compared
with NIS 96.1 billion in 2006, which constituted 71.6% of the total Manufacturing exports. In
other words, in 2007 an increase of 16.9% was recorded in the manufacturing exports of
establishments engaged in R&D compared with 2006; compared with a rise of 13% in 2006,
as compared with 2005 (Table 1).
4.3
Financing from Government Sources and International Foundations in
Manufacturing
The rate of financing from government sources and international foundations in 2007 was
4.3% of the total expenditure and capital formation for R&D – compared with 4.9% in 2006
and 17.5% in 1997. Direct financing from government sources and international foundations
in 2007 totaled NIS 459 million, compared with NIS 473 million in 2006. NIS 441 million
(4.5% of the total expenditure on R&D) was transferred to large establishments (with 50 or
more jobs). Approximately 33.7% of the total expenditures on R&D were made by
establishments that do not receive funding from government sources and international
foundations (Introduction table 13).
( 38 )
19. EXPENDITURE AND FINANCING OF R&D IN MANUFACTURING
1990-2007
25
4
Percentages
15
2.9
3
2.5
2.5
2
10
8.4
1.5
7.8
1
5
NIS Billions
3.5
20
0.5
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
0
Total Expenditure on R&D in Manufacturing (NIS Billions, at 1990 Prices)
Percentage of Financing from Government Sources and International Foundations out of total expenditure and
Capital Formation in R&D in Manufacturing (Left axis)
* As noted in the Introduction, in the Revisions section data for 2003 and 2004, the old series, appear in Appendix A.
In 2007, 34.3% of the financing for the Manufacturing industry from government sources and
international foundations was allocated to support for R&D in "Electronic Communications
Equipment" (compared with 40.0% in 2006); 34.0% was allocated to "Industrial Equipment
for Control and Supervision, Medical and Scientific Equipment" (31.7% in 2006); and 9.2% to
"Electronic Components" (8.4% in 2006). The remaining Manufacturing divisions received
lower percentages of financing from government sources and international foundations (a
total of approximately 16.8%).
In 2007, 66.3% of the total expenditure on R&D was made by establishments that received
funding from government sources and international foundations, compared with 71.6% in
2006. In these establishments, financing from government sources and international
foundations comprised 6.7% of total expenditure and capital formation for R&D, and the rate
of expenditure of R&D out of the total revenue was 9.9%, in 2007. Their proportion of total
exports by establishments conducting R&D was 51.4%, compared with 55.4% in 2006
(Introduction table 13).
( 39 )
Table 12.- Expenditures on R&D, by Percentage of Financing from
Government Sources and International Foundations
Percentages
Percentage of financing by
government sources and
international foundations, out of
total expenditures on R&D
Total
Percentage of expenditures on R&D
out of total expenditures on R&D in Israel
2005
2006
2007
100.0
100.0
100.0
0
26.3
28.4
33.7
Up to 10
63.8
60.6
52.5
11-20
6.9
6.6
9.4
21-30
1.9
2.5
3.4
31-40
0.5
1.5
0.2
41 and over
0.5
0.5
0.8
Table 13.- R&D in Manufacturing, 2007
Percentages
Total
Establishments
that received
financing from
government
sources and
international
foundations
Establishments
that did not
receive financing
from government
sources and
international
foundations
Jobs in R&D
100.0
59.9
40.1
Jobs for academic
professionals in R&D
100.0
63.2
36.8
Revenue of companies
100.0
49.4
50.6
Expenditure on R&D
100.0
66.3
33.7
7.3
9.9
4.9
100.0
51.4
48.6
80.4
83.6
77.2
4.5
6.7
-
Percentage of R&D
expenditure out of total
revenue
Export
Percentage of export
out of revenue
Percentage of funding from
government sources and
international foundations out
of total expenditure on R&D
( 40 )
4.4 Foreign Companies in Manufacturing
The activity of foreign-owned Israeli companies in Manufacturing R&D in Israel is substantial.
In 2007, the total expenditures for R&D by foreign-owned companies amounted to NIS 3.6
billion, compared with NIS 3.3 billion in 2006. That expenditure constitutes approximately
35.0% of the total expenditure for R&D in Manufacturing (compared with 34.0% in 2006). Of
19,500 persons employed in Manufacturing, 6,200 worked in foreign-owned companies,
compared with 18,400 and 5,400, respectively, in 2006. In those companies, financing from
government sources and international foundations amounted to 3.7% (compared with 2.3%
in 2006) of the expenditure and capital formation in R&D, compared with 4.6% in Israeliowned companies, (compared with 6.1% in 2006).
Table 14.- Selected Data on Manufacturing (Divisions 13-39), by Type of
Ownership
2007
NIS Millions
Thousands
Total jobs Full-time Academic
Total
Capital
Financing Revenue
in R&D jobs in R&D jobs in R&D Expenditure formation in
from
on R&D
R&D
government
sources and
international
foundations
Exports
Total
19.5
17.5
13.6
10,283
476
459
139,774
112,330
Israeliowned
13.3
11.6
9.1
6,690
198
317
105,420
80,944
Foreignowned
6.2
5.9
4.6
3,592
278
142
34,354
31,386
4.5 Aims of R&D Projects in Manufacturing
As in the survey of R&D in Computer and Related Services (Division 72) and Research and
Development (Division 73), participants in the survey of R&D in Manufacturing were also
asked to classify their projects in terms of innovation. Introduction table 15 shows that 54% of
the projects aimed to develop a new product (of those, 81% aimed to develop a new product
in the company); 5% aimed to develop a new technological process, and 41% of the projects
aimed to improve existing products.
Introduction table 15 presents the relationships between the types of innovation in projects
and the levels of their innovation. In this Introduction table, it is possible to distinguish
differences between the level of innovation in projects and the type of innovation, as reflected
in development of new products or improvement of existing products on the one hand, and
development of new technological processes on the other.
( 41 )
Table 15.- Innovation and Level of Innovation of Projects in Manufacturing
2007
Percentages
Level of
innovation
Total level
of
innovation
4.6
New in the world
New in Israel
New to the company
Total type of innovation
Distribution of type of
innovation
25
Type of Innovation
New
New
Significantly
product
process
improved
existing
product
13
68
35
5
6
13
3
62
70
100
81
100
18
100
100
100
54
5
41
R&D Expenditure in Selected Manufacturing Industries (Divisions)
in Israel and Technological Intensity
Table 29 presents the distribution of R&D expenditure in selected manufacturing industries in
Israel. The findings indicate that the R&D expenditures were mainly in the Electronic
Equipment industry (Divisions 32, 33, 34). In 2007, the expenditure in this division comprised
67% of total R&D expenditures, similar to the proportion in 1995 (66%). During the course of
that period, that Manufacturing division reached a higher level of dominance, which peaked
in 2001 (84%).
The manufacturing industries are divided into four groups, by technological intensity: hightechnology, medium-high technology, medium-low technology, and low technology. The data
in Introduction table 16 indicate that the vast majority of the expenditure for R&D (84%) was
in high-technology industries. Thus, the absolute majority of the high-level labour force
(academic professionals) were employed in high-technology industries (10,400 jobs for
academic professionals). The share of wages out of the total R&D expenditure amounted to
49.0% in medium-high technology industries, as in high technology and medium-low
technology industries (48.0% and 50.0%, respectively). Most of the funding from government
sources and international foundations (88.1%) was allocated to high technology industries.
This funding comprises approximately 5.3% of the total expenditure for research and
development in that group, compared with 3.0% and 4.0% in medium-high and medium-low
technology industries, respectively.
( 42 )
Table 16.- Revenue, Total Expenditure for R&D, Jobs, and Selected Data on
Companies Engaged in R&D – by Technological Intensity in Manufacturing
2007
Revenue
Exports
Total R&D
expenditure
Labour
Cost
In R&D
Technological
Intensity
Funding
Capital Total jobs Academic
from govern- Formation in compa- professionals
ment
In R&D
nies
In R&D
sources and
engaged
international
in R&D
foundations
NIS Millions
Thousands
Total
manufacturing
139,774
112,330
10,283
5,149
459
476
130.0
13.6
High-technology
77,125
67,973
8,829
4,324
388
283
72.6
11.1
Medium-high
technology
29,170
21,356
910
508
18
45
22.1
1.6
Medium-low
technology
27,174
20,252
462
260
50
145
29.0
0.9
Low-technology
6,305
2,748
81
56
3
3
6.4
0.1
Table 17.- Distribution by Technological Intensity of Companies Engaged in R&D,
0227
Percentages
Exports, Labour
out of cost, out of
revenue
total
expenditure
Technological Intensity
for R&D
Total manufacturing
80.4
High technology
88.1
Financing Expenditure Capital Academic
from
for R&D, formation professionals,
government
out of
for R&D, out of all jobs
sources and revenue
out of
In R&D
international
total
foundations,
capital
out of total
formation
expenditure
for R&D
4.
50.1
7.4
8.0
10.5
5
49.0
4.4
11.14
10.6
15.2
73.2
55.8
74.5
56.3
43.6
69.1
Medium-high
technology
Medium-low
technology
Low technology
2.0
10.
8
3.7
( 43 )
3.1
5.1
7.1
1.7
6.4
3.1
1.3
2.6
1.4
5. Terms, Definitions and Explanations
The survey population: The survey includes all manufacturing establishments and
companies with 5 or more jobs, who engaged in R&D in 2007. The survey population
includes the Manufacturing divisions ((13-39), the Computer and Related Services Division
(72) and the Research and Development Division (73) – which includes start-up companies,
technological incubators and research institutes. It does not include non-profit companies or
institutions, the diamond industry, nor R&D financed by the defense establishment.
The 2007 manufacturing survey is a continuation of R&D surveys in manufacturing that
began in 1997, that were derived from a framework of establishments engaged in R&D as
determined by the data obtained from the Innovation Survey conducted in 19971. The new
framework included: all establishments which indicated in the Innovation Survey that they
engage in development of products and processes; establishments that received funding
from the government and from international foundations in 1997-2007; and establishments
receiving funds from consortium.
The R&D survey in the Computer and Related Services Division (72) and the Research and
Development Division (73) is a continuation of surveys in these divisions that began in 1997.
The sample is updated every year according to information received from government
sources and international foundations. New companies and establishments that have begun
operating are added, and establishments that have shut down and/or have stopped
conducting R&D activities are removed from the sample.
Three questionnaires were prepared: the first for establishments in the Manufacturing
divisions (13-39), the second for companies in the Computer and Related Services Division
(72), and the third for companies in the Research and Development Division (73). The survey
questionnaires appear in the appendix.
The investigation unit: A manufacturing establishment, software company or research
institution, as defined in the Standard Industrial Classification of All Economic Activities,
1993, Second Edition, Central Bureau of Statistics, Jerusalem 2003, pp. 17, Chapter 2.2.
The reporting period: Establishments were asked to report on their R&D activities in the
calendar year (January-December) 2007. The data on the number of academics (see
paragraph f, below), practical engineers and technicians relate to December 2007.
Research and Development: includes systematic and creative activity, intended to increase
the amount of knowledge of mankind, culture and society; and the use of knowledge in order
to create new applications (the OECD ‘Frascati Manual’, 2002). The definitions that
appeared before the sample units can be found in the questionnaire appendix appearing in
this publication.
Jobs (formerly: employed persons): Employee jobs, owners and unpaid family members,
kibbutz members and workers hired through employment agencies.
Number of full-time jobs (full-time equivalent jobs): Includes a calculation of part-time
jobs as full-time jobs (e.g., 6 half-time engineers = 3 full-time jobs).
1
See Survey of Structure of Labour Force, Patterns of Work and Innovation in Manufacturing 1997,
Current Statistics no. 16, Central Bureau of Statistics, Jerusalem, 1999.
( 44 )
Employee jobs (formerly: employees): All workers appearing on employee payrolls,
including members of co-operative societies, as well as workers from the Judea and Samaria
Area. Unsalaried kibbutz members employed in a kibbutz establishment are considered to be
owners. Self-employed persons engaged in piecework for the establishment are not
included.
Jobs for academics: Jobs for persons with an academic education (Ph.D., B.A., and M.A.,
including engineers) or those with an equivalent level of education (i.e., persons who have
not yet completed their academic studies, but are employed in jobs requiring an academic
degree).
Jobs for practical engineers and technicians: Jobs for persons with diplomas of practical
engineers/technicians or of a similar qualification (e.g., those who have practical experience,
laboratory technicians and draftsmen).
The following is an explanation about employed persons, employees/jobs, and employee
jobs:
Labour cost (formerly: wages and additional expenses): includes, in addition to wages,
expenses supplementary to wages and additional labour cost components, such as the
employer’s share of National Insurance payments, advanced study funds, provident funds,
severance pay, transporting employees to work, maintaining a workers cafeteria, worker
training expenditures, etc.
Wages and salaries (= wages): all payments on which income tax is due (before deduction
of taxes), as they appear on employee payrolls. These payments include basic salary and
the following increments: cost of living, professional, seniority, family allowances (excluding
employees’ children allowance), travel allowance, premiums, incentive, overtime, absence
(e.g., vacation, sickness, religious holidays), convalescence, professional literature, “13thmonth” salary, car allowance (including imputation for a vehicle owned by the employer and
used by the employee), telephone, clothing, per-diem expenses (on which only income tax is
due), and payments in kind (e.g., meals, holiday gifts and housing), as well as one-time
payments, such as: shift work, on-call pay, bonuses, proficiency allowance and retirement
grants.
Other expenses, including overhead: The establishment’s expenditures related to R&D
which are not included in wages, such as overhead, maintenance, travel abroad related to
R&D, etc.
Expenditure on raw materials and auxiliary materials for R&D: Total expenditures on
materials used for research and development. This item includes: raw materials, auxiliary
materials, tools and instruments whose usage is less than one year, fuel, water, electricity,
etc.
Payments to external elements for R&D work (excluding payment for patents): This
item relates to research and development commissioned from external elements.
Capital formation in buildings and equipment for R&D: Capital formation in buildings,
machinery and equipment for research and development, whose usage exceeds one year.
( 45 )
Internal expenses: Expenses on labour costs, other expenses (including overhead), and
expenditure on raw materials and auxiliary materials for research and development
(excluding payments to external elements).
Data on the number of jobs, on revenue of establishments engaged in R&D, and on
total manufacturing are based on annual summaries of monthly reports of establishments
included in the framework of the manufacturing indices. Establishments that are not included
in the sample of the manufacturing indices reported these figures in a special supplement to
the questionnaire of the R&D survey.
Data on manufacturing revenue: Data on manufacturing revenue were included in the
survey on R&D by matching the file of R&D data with the file of reports for the manufacturing
indices. The data include income of the establishments from the sale of their products (at
market prices, including purchase tax and excise duty and excluding subsidies and export
incentives), income from work and repairs, income from contract work and from work
performed with materials of the ordering party.
Financing from government sources (government financing for R&D) and international
foundations: Financing for conducting R&D activities, which is provided by the Chief
Scientist of the Ministry of Industry, Trade and Labour; other government ministries;
international foundations; etc.
Consortiums: A union of industrial companies and research institutes, for the purpose of
conducting a program for the development of “generic technologies” (a technology which is
used in the development, planning and production of innovative products in a number of
industrial companies).
International comparison - expenditure on R&D in selected manufacturing industries:
The calculation of R&D expenditures by industries includes internal expenses in the
establishment (expenditure on labour cost and salaries, expenditure on raw materials, and
other expenditures, including overhead), and capital formation in buildings and equipment for
R&D; but does not include payments to external elements and sub-contractors, such as:
research institutes, analysis institutes, engineering services, private consultants, etc. In a
survey of R&D in the business sector, the expenditure on R&D includes internal expenditures
and payments to external elements and sub-contractors; but does not include the category of
capital formation in buildings and in R&D equipment.
Foreign-owned company: Any company for which at least 50% of the ownership is held by
foreign residents.
Imputations of data: Two types of imputations are discerned:
1. Imputation of data for companies whose response to the survey could not be obtained, for
various reasons. This type of imputation was only done for companies for whom outside
data (e.g., accounting reports, government support, etc.) could be found, which attests to
R&D activity during the relevant year. This imputation is done in one of two possible ways:
a. Based on the relative share of the company in the average activity in the relevant
Division, on the basis of the average of data for 2007. The calculation of the average,
which takes into account the centralism of the Division, means that a company that
constitutes over 40% of the activity in the Division will not be a part of the calculation of
the average.
( 46 )
b. Based on data from former surveys (if any), in addition to administrative data from
various sources.
2. The second type of imputation is an imputation of the missing data in the questionnaire1
(e.g., details of payments to external elements, distribution of investments in fixed assets,
etc.). The imputation is done in one of two ways, similar to those presented in Type 1.
6.
Methodology
6.1
Reliability and Limitations of the Data
The results of this survey, like those of any other statistical survey, are subject to a number
of limitations. The limitations in the present survey, are:
1. The establishments did not accurately record expenditures related to R&D (especially in
the case of expenditure on labour costs, when a considerable portion of those engaged in
R&D are also engaged in other activities, and there is no distinction in the records
between the labour inputs in the various activities);
2. There was only a partial understanding of the definition of “Research and Development”.
As a result, some establishments failed to include R&D activities, whereas activities not
necessarily related to R&D were included.
3. Lack of complete, updated information on changes in the nature of the activities that the
companies engage in (particularly small businesses in Manufacturing), which, in some
cases leads to classification that is not optimal, since the classification was based mainly
on the previous survey.
4. For different reasons, some companies did not respond to one or more sections of the
questionnaire, which requires an estimation for some of the missing data (based on
information from previous years, as well as on other information).
5. It should be borne in mind that the smaller the industry (in terms of the number of
companies engaged in R&D), the more the problems mentioned in (c) and (d) are
encountered. Ultimately, this leads to higher levels of variance when the distribution of
industries is broader.
It should be noted that most of the establishments and companies which were approached
responded willingly, and filled out the questionnaires.
In the survey of R&D in Computer and Related Services (Division 72) and Research and
Development (Division 73), as mentioned, the sample was derived from the main framework
of companies that received funding from government sources and international foundations,
as well as on a supplementary framework of companies who did not receive funding and are
categorized in these divisions in the Business Registry of the Central Bureau of Statistics.
1
The questionnaires are attached to this publication.
( 47 )
6.2 Companies and establishments and rates of response
681 companies and establishments participated in the survey, with 338 of them being in
Manufacturing, 187 in Computer and Related Services (Division 72) and 156 in Research
and Development (Division 73). 97.3% of the companies responded to the survey, and
62.0% reported on R&D activity. 38% of the companies reported that they do not engage in
R&D. This rate results from the difficulty of fully identifying the population relevant to the
survey, because there is no complete information on companies who engage in R&D. Even
when this information exists, R&D activity in a certain year does not necessarily attest to
R&D activity in the following year, because certain companies conduct R&D when the need
arises, and not on an ongoing basis. 2.7% of the companies and establishments from whom
no response was received includes companies that were closed down, not located or refused
to respond. For 28% of the companies and establishments that did not respond to the survey
(who constitute 0.7% of the entire sample), data were imputed according to the methodology
detailed above. The response rates to questions were calculated for all the questions in the
questionnaire, and they will be detailed in relation to the findings.
Distribution of
Response to 2007 Survey
No R&D
Activity
37.6%
Reported
R&D Activity
61.7%
Imputation
0.7%
Total Number of Companies
681
7. International comparisons
This section is based on the OECD publication “Main Science and Technology Indicators
2/2009”1. It is important to note that the Israeli data do not include defense R&D conducted
by the Ministry of Defense and the organizations it includes, compared with most of the
countries in the comparison, for whom there are data on defense R&D at the national level
and defense R&D conducted by the business sector.
The percentage of the national expenditure on R&D out of the total GDP, is a basis for a
comparison of the effort invested by the country in R&D. In 2007 the national expenditure on
civilian R&D stood at NIS 32.6 billion (in current prices), which is 4.8% of the GDP. The State
of Israel leads in this datum, among both the developed and developing countries.
1
The Israeli data include data on additional industries: financial services, water, electricity and its
production, communications and transportation. These data are imputed by the National Accounts
Department, with the latter industries (excluding financial services) all included in the same group.
As a result, gaps will be found between the data for Israel presented in this section, compared with
those presented in previous sections.
( 48 )
*Israel
Sweden
Finland
Japan
Korea
United States
Chinese Taipei
Average
Denmark
Germany
Singapore
Total OECD
France
EU-15
Canada
Belgium
United Kingdom
Norway
China
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Ireland
Percentages
20. NATIONAL EXPENDITURE ON R&D AS
A PERCENTAGE OF THE GDP
2007
Source: OECD, Main Science and Technology Indicators, December 2009.
* Defence excluded (all or mostly).
Diagram 20 presents the percentage of the national expenditure on R&D out of the GDP,
with Sweden, Finland, Japan and Korea coming after Israel. The datum for Israel is 2.2
percentage points higher than the average (average: the average percentage of the
countries appearing in the diagram alone), with Sweden coming after it, with a datum only
1% higher.
21. DEVELOPMENT OF RATE OF EXPENDITURE ON R&D
OUT OF TOTAL GDP
1997-2007
5.0
4.5
Israel*
Finland
Percentages
4.0
Japan
3.5
3.0
United
States
Korea
2.5
2.0
1.5
Total
OECD
EU-15
1.0
0.5
0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: OECD, Main Science and Technology Indicators, December 2009.
* Defence excluded (all or mostly).
( 49 )
Diagram 21 presents the development of the rate of national expenditure on R&D out of the
total GDP, over a decade, in the leading countries in this index, in the 15 leading EU
countries, and in the OECD countries. Although Israel already headed the list at the
beginning of the decade, it experienced rapid growth in this index, compared with the rest of
the countries appearing on the list. In Israel this rate grew by 59% from the beginning of the
decade, compared with Korea, who had the second fastest growth rate out of all the
countries appearing in the list, whose rate grew by approximately 35%.
Table 18.- Rate of National Expenditure on R&D out of the GDP and
National Expenditure on R&D
A
B
Ratio of National
Expenditure on
R&D per product
Ratio of National
Expenditure on
R&D per capita
Ratio of Gaps
A/B
Canada
150.5
80.7
1.9
China
230.6
1,616.1
0.1
United Kingdom
161.5
104.8
1.5
EU-12
150.5
107.6
1.4
France
133.3
98.3
1.4
Belgium
150.5
96.7
1.6
OECD Countries
108.8
75.5
1.4
Singapore
88.9
1.9
46.5
Germany
88.1
51.4
1.7
Denmark
86.7
43.5
2.0
Taiwan
81.7
66.0
1.2
United States (USA)
78.9
6.9
11.5
Korea
48.3
53.4
0.9
Finland
37.2
9.6
3.9
Sweden
31.9
0.0
701.1
Japan
38.4
14.2
2.7
Israel
0.0
0.0
..
Source of data: OECD, Main Science and Technology Indicators, December 2009.
Introduction table 18 presents the gap1 in percentages between Israel and selected countries
in indices: the rate of national expenditure on R&D out of the GDP (Column A), and the
national expenditure on R&D in PPP$ per capita prices (Column B). From the table it can be
seen that the gap ratio (Columns A/B) is very high, especially in the countries that lead in
expenditure on R&D (such as Sweden). The gap ratio points to the fact that a large part of
the gap is derived from a low per capita product in Israel, compared with the leading
countries - a well-known feature of the Israeli economy. When looking at the per capita
expenditure on R&D, the gap between Israel and the leading countries shrinks, and in some
of the cases disappears completely. However, Israel remains among the leading countries in
1
The gap is a percentage gap which is calculated as follows:
BERDtoGDPc
 1 , where c is the relevant country.
BERDtoGDPIsrael
( 50 )
the world in the field of research and development. In expenditure on research and
development made by businesses (BERD) as well, Israel leads the countries of the world
in the rate of this expenditure out of the total product, which stands at 3.8%.
22. RATE OF EXPENDITURE ON R&D PERFORMED
BY BUSINESSES, OUT OF THE GDP
2007
Israel
Japan
Sweden
Finland
Korea
United States
Taiwan
Denmark
Germany
Singapore
Total OECD
Belgium
France
EU-15
United Kingdom
China
Canada
0
1
2
3
4
5
Percentages
Source: OECD, Main Science and Technology Indicators, December 2009.
The share of the business sector in the national expenditure on research and development is
the main one in Israel, as it is in the rest of the countries. This sector’s contribution to the rate
of the national expenditure on research and development in Israel was 81%, compared with
the USA (72%), the OECD countries (69%) and the 15 leading countries of the EU (64%), in
which the business sector contributed less than 75%. These indices create a picture in which
Israel leads in expenditure on research and development both on the national level and on
the business sector level. As noted in Para. 2.5, Israel attracts R&D centers of multi-national
companies, due to its innovative culture and the supportive conditions (Enablers) that exist
here. This phenomenon has a great influence on the entire field of R&D activity, and on the
R&D expenditure of businesses as an expression of that activity. Diagram 21 presents the
rate of national expenditure on R&D by businesses (BERD) out of the GDP, with R&D
centers deducted from the entire activity. This leads to a significant reduction in the rate, from
3.8% to 2.7% in 2007, a drop of 1.1 percentage points.
( 51 )
23. RATE OF EXPENDITURE ON R&D PERFORMED
BY BUSINESSES OUT OF THE GDP,
EXCLUDING R&D CENTERS OF INTERNATIONAL FIRMS
2005-2007
3.0
Percentages
2.5
2.0
1.5
1.0
0.5
0.0
2005
2006
2007
Even without the R&D centers Israel would be the leading country in this index, although the
gap between it and Japan would shrink almost completely. In 2007 the R&D expenditure of
businesses grew by 16.8%, a high rate compared with recent years. Israel experienced a
growth similar to countries such as China, Singapore and Korea, with China presenting the
highest growth rate among the studied countries. In 2007 high growth rates were observed in
countries that were not studied, such as Turkey (45.0%) and Portugal (33.0%).
24. PERCENTAGE OF CHANGE IN EXPENDITURE ON R&D PERFORMED
BY BUSINESSES
2007
China
Singapore
Israel
Korea (2006)
Taiwan
United Kingdom
Finland
United States
Belgium
Total OECD
Japan
EU-15
Germany
Denmark (2006)
France
Sweden
Canada
-5
0
5
10
15
20
Percentages
Source: OECD, Main Science and Technology Indicators, December 2009.
( 52 )
25
30
Funding from government sources and international foundations for business R&D grew in
2007, although the percentage of funding from this source dropped by 0.5 percentage points,
because the expenditure on R&D grew significantly.
Table 19 – Rate of BERD Financing from Government Sources and
International Foundations, and the BERD Rate of Growth in 2007
Annual rate of
growth of R&D
expenditure
conducted by
businesses
Percentage of
government
financing in
the R&D
expenditure
performed
3.5 by
businesses
4.8
Portugal
33.3
China
Singapore
Israel
26.1
23.6
16.8
Korea
Italy
Taiwan
14.0
12.5
10.2
6.2
6.6
2.0
United Kingdom
Russia
Norway
9.5
8.8
8.7
6.0
55.3
8.7
Finland
United States (USA)
Belgium
6.4
5.7
5.3
3.5
9.9
5.7
OECD Countries
Japan
EU-12
5.3
4.5
4.3
6.6
1.1
7.0
Germany
Denmark
France
2.6
2.3
-0.2
4.5
2.5
10.6
Sweden
Canada
-2.4
-3.9
4.3
2.2
5.4
4.4
Source of data: OECD, Main Science and Technology Indicators, December 2009.
From Introduction table 19 it appears that the rate of financing from government sources and
international foundations in Israel is slightly less than the average in the countries appearing
in the table (the average is 5.1%, without Russia, that presents a high financing rate), but
even closer to the average in the countries that presented over 10.0% growth in the R&D
expenditure by businesses (4.7%).
The number of full-time jobs in research and development in Israel in 2007 was
approximately 0.7% of the total population. In this index as well, Israel leads the list of
countries appearing in this diagram. The gap between Israel and the 15 EU countries is 0.4
percentage points, that constitute a gap of 146%.
( 53 )
25. RATE OF FULL-TIME EQUIVALENT JOBS IN R&D OUT OF TOTAL
POPULATION
2007
Israel
Sweden
Finland
Denmark
Taiwan
Japan
Canada
Singapore
Germany
Korea
France
Belgium
EU-15
United Kingdom
China
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Percentages
Source: OECD, Main Science and Technology Indicators, December 2009.
The expenditure on research and development by businesses (BERD) for a full-time job
conducting R&D in Israel is $183,000 (revised PPP). This amount places Israel in a low
position among the countries appearing in Diagram 26, a place that was not characteristic to
Israel in international comparisons.
( 54 )
26. BUSINESS ENTERPRISE EXPENDITURE ON R&D * (BERD)
BY A FULL-TIME EQUIVALENT JOB ENGAGED IN R&D
2007
Singapore
United Kingdom
Japan
Korea
Germany
EU-15
Sweden
Belgium
Finland
France
Israel
Canada
Denmark
Chinese Taipei
China
0
50
100
150
200
250
300
350
Thousand Dollars
* The value is in $ Thousands, revised In $PPP.
Source: OECD, Main Science and Technology Indicators, December 2009.
Table 32 details the distribution of the R&D expenditure by industries in Israel and in the
OECD countries. This comparison indicates that the share of the “Electronic Communication
Equipment” industry (Divisions 32, 33, 34), in the total R&D expenditure in Israel was 71% very high compared to the median of 18% among the OECD countries. This gap grew,
compared with previous data, in which the share of the “Electronic Communication
Equipment” industry was 67% in Israel, and only a 21% median in the OECD countries.
However, the share of the “Chemical Products” industry (29) in Israel, 13%, is relatively low
compared with the average of 22% in the OECD countries.
( 55 )