Innovation and Investment: Nasdaq-Listed Companies of Israel

Abstract

Using a cross-section of Nasdaq-listed Israeli companies, we examine the impact of R & D spending on their market values and the ecosystem for start-ups in Israel. We find a very strong positive association between the two, learning that $1 million of spending in R & D associated with an increase of $5 million of market value. Among all countries outside the U.S., Israel is third after Canada and China in terms of the number of stocks registered on Nasdaq. Since 1981, sixty-one companies have registered, and their total R & D spending in 2009 reached $3.750 billion, which is approximately equal to the total R & D expenditure of Turkey. In the region, Middle Eastern and North African (MENA) countries cannot accomplish to register in Nasdaq. Israel’s great success comes from the strong dedication and cooperation between private and public sectors in research and venture capital. Israel spends 4.7% of its GDP for R & D, which is equal to the total expenditure of MENA.