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Does the Land of Venture Capital Have a National Competitive Advantage for Private Equity?

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Assignment 1

Does the land of Venture Capital have a national competitive advantage for Private Equity?

Checcarelli Betti Francesco
Hawlasewicz Maja
Janssen Wim Kees
Irina Müller

Doing Business in Emerging Markets
Fall Term 2014
04. November 2014

Abstract
This assignment conducts an analysis of Israel using Porter’s Diamond model with a focus on the Private Equity industry. The aim is to understand if Israel has a national competitive advantage for the PE industry.

Factor conditions

National level. The country’s natural endowment is rather weak, forcing the nation to focus on knowledge-based industries (i.e. software, biotech, etc…) rather than being heavily dependent on natural resources. The ongoing hostilities with its neighbouring countries shaped the economic landscape, having a positive effect on Israel’s defence industry, which in turn provided a foundation for wide parts of the country’s high-tech industries. In addition, the near east led to even closer collaboration between Israel and the US, which is the top foreign investot in Israel, accounting $19.7 billion of the $74.4 billion in FDI in 2012, or 26.5% of the total (Kumar et al., 2009, p. 11).

PE activity. These preconditions, supported by a strong education system within science and engineering-related subjects, helped Israel to build up one of the country’s most important strategic assets: specialized know-how and well-educated labour, especially within the high-tech sector, give rise to potential (later stage) investment opportunities for skilled PE managers. In addition, technology gradually becomes a potential source of acquisitions as the industry ages. However, the instability of political situation in the middle-east, along with associated currency risks, may reduce the appetite for investing in Israeli firms.

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