2011 in Association with the US–Israel Science and...

The U.S.–Israel Innovation Index:Comparing International Linkages In Innovation

Developed by the US–Israel Science and Technology Foundationin Association with the US–Israel Science and Technology Commission 2011

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Dr. Ruth Arnon Paul Ehrlich Professor of Immunology at the Weizmann Institute, Israel

Dr. Kathryn Atchison Vice Provost, New Collaborative Initiatives, University of California, Los Angeles

Dr. Dan Breznitz Associate Professor, Sam Nunn School for International Affairs and the College of Management–Georgia Institute of Technology

Ms. Cathy Campbell President and CEO, CRDF Global

Mr. Ohad Cohen Head of Commercial Mission, Embassy of Israel, United States

Dr. Ora Dar Head of the Life Sciences Sector, Israel Ministry of Industry, Trade and Labor, Office of the Chief Scientist

Mr. Asher Epstein Managing Director, Dingman Center for Entrepreneurship, Smith School of Business, University of Maryland

Ms. Miriam Erez Professor Emeritus, Faculty of Industrial Engineering and Management, Technion and Chair, Knowledge Center for Innovation, Technion–Israel Institute of Technology

Dr. Yona Ettinger Executive Director of the U.S.–Israel Binational Science Foundation (BSF) 1992-2005

Mrs. Tamar Guy Executive Director, Israel–America Chamber of Commerce

Prof. Yehuda Hayuth Senior Research Fellow, Samuel Neaman Institute for National Policy Research, Technion, Israel Institute of Technology

Mr. Jonathan Heimer Senior Commercial Officer, U.S. Embassy, Tel Aviv, Israel

Dr. Alan Leshner CEO, American Association for the Advancement of Science

Prof. Manuel Trajtenberg Chairman of the Planning and Budgeting Committee, Israel Council for Higher Education

Ms. Limor Nakar-Vincent Director, U.S. Business Development, Israel-U.S. Binational Industrial Research and Development Foundation (BIRD)

Ms. Debra van Opstal Senior Advisor, Center for the Study of the Presidency and Congress

Ms. Susan Sauer Sloan Director, Government–University–Industry Research Roundtable (GUIRR), The National Academies

Mr. Dan Vilenski Entrepreneur, Former Chairman of Applied Materials Israel

Dr. Glenn Yago Senior Director/Senior Fellow, Milken Institute

Dr. Eitan Yudilevich Executive Director, Israel–U.S. Binational Industrial Research and Development Foundation (BIRD)

The U.S.–Israel Science and Technology Foundation would like to thank its Advisory Committee for their significant contributions to the U.S.–Israel Innovation Index (USI3). The Advisory

Committee comprised of academic, industry, and policy thought leaders provided crucial feedback and insight throughout the entire process of planning, researching, and producing the Index.

The USI3 Advisory Committee generously dedicated their time and expertise to support the development of the USI3. While they informed the USI3 development process, specific outcomes and conclusions may not reflect the positions of the individual Advisory Committee Members.

U.S.–Israel Innovation Index Advisory Committee

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The U.S.–Israel Innovation Index: Comparing International Linkages In Innovation

Developed by the U.S.–Israel Science and Technology Foundation in Association with the U.S.–Israel Science and Technology CommissionPrepared by Futron Corporation

Copyright © 2011

U.S.–Israel Science and Technology Foundation1300 Pennsylvania Ave., NWSuite 700Washington, DC 20004

Telephone: 202.204.3102 • Fax: 202.289.7322http://www.usistf.org


*Appointed to the U.S.–Israel Science and Technology Commission

*

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About the U.S.–Israel Science and Technology Foundation

The U.S.–Israel Science and Technology Foundation (USISTF) is a Washington, D.C. based nonprofit organization, created by

an initiative of the U.S. Department of Commerce and Israel’s Ministry of Industry, Trade and Labor. The mission of the USISTF is to facilitate research and development cooperation between the U.S. and Israel’s industry, government and universities in order to enable science and technology based economic growth for the benefit of both nations. The USISTF achieves its mission through producing research and information, convening scientific workshops and industry events, and helping to facilitate new R&D framework agreements among existing government programs.

USISTFAnn Liebschutz, Executive Director Eve Copeland, Program Manager

USISTCDavid Miron-Wapner, Executive Director

USISTF Board of DirectorsEric Benhamou Arnold Brenner Steven Friedman Uzia Galil Avi Hasson, Chair Kenneth Rind Denis Simon Zehev Tadmor Yoram Yahav

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Table of ContentsExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

1. Introduction and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31.1. Why Benchmark Linkages Between the United States and Israel? . . . . . . . . . .31.2. Study Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41.3. Rationale for Chosen Indicators and Countries . . . . . . . . . . . . . . . . . . . . . . .41.4. What is an Index? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61.5. Summary of Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71.6. Methodology and Model Structure Overview. . . . . . . . . . . . . . . . . . . . . . . .8

2. Benchmarking the U.S.–Israel Relationship Against Other Nations. . . . . . .102.1. Government Category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102.2. Human Capital Category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122.3. Private Sector and Industry Category . . . . . . . . . . . . . . . . . . . . . . . . . . . .152.4. Research and Development Category . . . . . . . . . . . . . . . . . . . . . . . . . . . .182.5. Future Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

3. The U.S.–Israel Relationship in Science and Technology . . . . . . . . . . . . . . .233.1. Science and Innovation Profiles of the U.S. and Israel . . . . . . . . . . . . . . . . .233.2. Describing the U.S.–Israel Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . .283.3. Government Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293.4. Human Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .303.5. Private Sector and Industry Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .303.6. Research and Development Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .323.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

List of ExhibitsExhibit 1: Comparator Countries and Indicator Categories Used in the Index . . . . .5Exhibit 2: Summary Results by Indicator Category . . . . . . . . . . . . . . . . . . . . . . . .6Exhibit 3: Summary Index Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Exhibit 4: Index Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Exhibit 5: Summary Results – Government Indicators . . . . . . . . . . . . . . . . . . . . .11Exhibit 6: Aggregate Government Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Exhibit 7: Summary Results – Human Capital Indicators . . . . . . . . . . . . . . . . . . .13Exhibit 8: Aggregate Human Capital Results . . . . . . . . . . . . . . . . . . . . . . . . . . .14Exhibit 9: Indicator HC-4, H1-B Entries, in Time Series . . . . . . . . . . . . . . . . . . . .15Exhibit 10: Summary Results – Private Sector and Industry Indicators . . . . . . . . . .16Exhibit 11: Aggregate Private Sector and Industry Results . . . . . . . . . . . . . . . . . .17Exhibit 12: Summary Results – Research and Development Indicators . . . . . . . . .19Exhibit 13: Aggregate Research and Development Results . . . . . . . . . . . . . . . . .20Exhibit 14: Indicator R&D-3, Co-patent Applications, in Time Series. . . . . . . . . . .21Exhibit 15: Israeli Science, Technology, and Innovation Summary . . . . . . . . . . . .23Exhibit 16: Core Statistics of Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Exhibit 17: U.S. Science, Technology, and Innovation Summary . . . . . . . . . . . . .26Exhibit 18: Core Statistics of the United States . . . . . . . . . . . . . . . . . . . . . . . . . .27Exhibit 19: Raw Data on U.S. and Israel Indicators . . . . . . . . . . . . . . . . . . . . . .28Exhibit 20: Government Budget Appropriations on Research and Development . .29Exhibit 21: Higher Education Sector Expenditure on Research and Development . .30Exhibit 22: U.S. H1-B Visas Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30Exhibit 23: Industry Financed Gross Domestic Expenditure on Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31Exhibit 24: Activity of Multinational Companies. . . . . . . . . . . . . . . . . . . . . . . . .31Exhibit 25: Total National R&D Expenditures as a Percentage of GDP . . . . . . . . .32Exhibit 26: R&D Activity by Foreign Affiliates of Companies . . . . . . . . . . . . . . . .32

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Executive Summary

The U.S.–Israel Science and Technology Foundation (USISTF) has developed the U.S.–Israel Innovation Index ("the Index") in order to assess innovation-related collaboration between the U.S. and Israel and to compare and benchmark that collaborative relationship to the collaboration that exists between the United States and a set of countries that are technically and economically similar to Israel and, like Israel, possessing important trade relationships with the U.S.

The Index measures innovation-related collaboration between the United States and Israel by tracking metrics measuring activities and relationships in the following primary categories: Government, Private Sector & Industry, Human Capital, and Research & Development (R&D). Though metrics measuring cooperation in these innovation-related activities will give an idea of the benefits of U.S.–Israel science and research cooperation, the true value of the relationship will be difficult to understand without comparisons to similar cooperation between the United States and other innovation inclined countries. To this end, the Index benchmarks the U.S.–Israel relationship against that between the U.S. and a selected set of countries that are economically and competitively similar to Israel.

The Index results show that Israel’s relationship with the U.S. in innovation-related activities is stronger than that between the U.S. and any of the other compared countries. The Index indicates that the United States and Israel have strong and consistent linkages in areas related to innovative activities with a balance of strong linkages in all four indicator categories. The Index has identified a number of themes that characterize the U.S.–Israel relationship related to science and technology; and relate to international collaboration in innovation broadly. These trends include:

�� The U.S.–Israel technology relationship clearly benefits from the unique political relationship between the two countries.

�� Israel is viewed an R&D destination of choice among many U.S. American companies, while many Israeli companies enter the U.S. market to obtain capital and penetrate a large economic market.

�� U.S.–Israel cultural and societal ties transcend a large variety of non-scientific and technological elements of the relationship; which further stimulate interaction between the two countries.

Leveraging innovation-related international collaboration is one vector toward achieving socioeconomic advancement goals. How policymakers, academic practitioners, and industry leaders utilize and develop the strong U.S.–Israel relationship described in the U.S.–Israel Innovation Index remains to be seen.

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1. Introduction and Objectives

The U.S.–Israel Innovation Index measures quantitative and qualitative aspects of the U.S.–Israel relationship in innovation-related, knowledge-intensive activities. This study adapts a definition of innovation developed by the Advisory Committee on Measuring Innovation in the 21st Century Economy in its 2008 report to the Secretary of Commerce; applying it to country-level activity (rather than individual firm level as the Advisory Committee did). Within the context of the U.S.–Israel Innovation Index, innovation is considered as:

"The design, invention, development and/or implementation of new or altered technology, processes, systems, organization structures, or business models for the purpose of creating new value and economic returns for the country, it’s firms, and/or its citizens.1"

The Index sets out to measure linkages that contribute to innovation: those elements of binational collaboration that contribute to the development of knowledge and/or scientific and technological advancement for economic or societal development. It:

�� Represents an original framework for evaluating binational scientific, technology, and business relationships that cross government, society, academia, and industry.

�� Provides a quantitative analysis that can be tracked year-on-year going forward.

�� Produces an annual report on the U.S.–Israel Innovation Collaboration Relationship which aims to support and stimulate industry, government, media, and civil society discourse.

In essence, the Index measures the intensity of innovation-related linkages between the compared countries and the U.S.

1.1. Why Benchmark Linkages Between the United States and Israel?Israel is a world leader in innovation, dedicating a greater portion of GDP to research and development than any nation in the world.2 Per capita, Israel also leads in the creation of high-tech start-up companies, a testimony to the country’s entrepreneurial spirit.3 The country has an ideas-driven economy where high technology collaboration with the United States has generated tremendous benefits for both countries. The United States is the single most important strategic relationship for Israel not only in terms of security, but in trade as well. A much larger economy, the United States maintains a number of robust trading

1 Adapted from: The Advisory Committee on Measuring Innovation in the 21st Century Economy. Innovation Measurement: Tracking the State of Innovation in the American Economy. January 2008. http://www.kauffman.org/uploadedFiles/ innovation_measurement_11808.pdf

2 OECD, Main Science and Technology Indicators, 20103 Senior, Dan and Singer, Saul. Start-up Nation: The Story of Israel’s Economic Miracle. Council for Foreign Relations. 2009

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relationships with varied economies around the world. Benchmarking the U.S.–Israel relationship vis-à-vis the relationships the U.S. holds with other nations enables us to better understand how the science and technology relationship between the U.S. and Israel measures against other science and technology related relationships of the U.S.; and to identify strengths and weaknesses exhibited in those relationships.

Israel’s future development – economic, social, political – is closely tied to the strength of the U.S.–Israel relationship, while the United States’ geopolitical prominence is reflected in its relationship with Israel. Existing programs must be bolstered and new initiatives forged. The trajectory for success has been outlined in the Israel 2028 Vision and Strategy, which describes a set of goals aimed at bolstering U.S.–Israel cooperation in science and technology and recommendations for moving Israel toward ever-stronger economic and social footing.4 To track progress towards those goals, the U.S.–Israel Science and Technology Foundation has initiated the U.S.–Israel Innovation Index Project ("the Index").

1.2. Study ObjectivesThe U.S.– Israel Innovation Index assesses innovation-related collaboration between the U.S. and Israel and compares and benchmarks that collaborative relationship to the linkages that exist between the U.S. and a set of other innovation-inclined countries which, like Israel, possess important trade relationships with the U.S.

The Index measures innovation-related collaboration between the United States and Israel by tracking metrics measuring activities and relationships in the following primary categories: Government, Private Sector & Industry, Human Capital, and Research & Development (R&D). Though metrics measuring cooperation in these innovation-related activities will give an idea of the extent of U.S.–Israel cooperation related to scientific and technological innovation, the true character of the relationship will be difficult to understand without comparisons to similar cooperation between the United States and other innovation inclined countries. To this end, the Index benchmarks the U.S.–Israel relationship against that between the U.S. and a selected set of countries.

1.3. Rationale for Chosen Indicators and CountriesCountries included as comparators in the Index were selected based on criteria for evaluation which emphasized standardized data availability and comparability, (e.g., supporting apples to apples comparison) and qualitative similarities in the nature of the relationship between the country and the U.S. and that of the relationship between Israel and the U.S. Accordingly, the following factors were used in evaluating countries for potential inclusion in the

4 U.S.–Israel Science and Technology Commission (USISTC), Israel 2028: Vision & Strategy Plan, 2008, http://www.usistf.org/05_A_curProj_StretgicPlan.html

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benchmarking index. Not all countries ultimately chosen for inclusion share all of these factors.

�� Important trade relationship with the U.S.

�� Similar knowledge-intensive industries and economy size to Israel.

�� OECD membership/engagement (provides common and comparable data source).

�� A desire to include geographic diversity in the Index was also important in the selection of the included countries.

Indicators (or "metrics") used to compose the Index were selected in four categories, covering activities and linkages in Government, Private Sector & Industry, Human Capital, and Research & Development. Factors governing the selection of indicators included:

�� Metrics should be available in time series to support repeated annual evaluation.

�� Selected metrics should, to the extent practicable, be quantitative in order to reduce the possibility of bias (qualitative metrics are more open to debate and interpretation).

�� To drive transparency, data should be publically available and/or replicable; where possible, open source information was used.

Metrics used in the Index primarily measure linkages or collaboration between countries, but selected indicators also assess baseline S&T related resources within a given country. Exhibit 1, below, provides an overview of the country and indicator types used in the Index.

Exhibit 1: Comparator Countries and Indicator Categories Used in the Index

Comparator Countries Indicator Categories

• Chile

• Finland

• Germany

• Israel

• Singapore

• South Korea

• Sweden

• Switzerland

• United Arab Emirates

Government

Indicators measure and analyze the extent of government to government treaties, funding, and diplomatic linkages related to scientific and technological activity.

Private Sector and Industry

Indicators measure knowledge-intensive industry commercialization and coordination, including investment patterns and trade relationships.

Human Capital

Indicators assess the degree of linkages in human capital in science and technology related fields; including educational exchanges and academic literature co-authorship.

Research and Development

Indicators quantify both input activities such as R&D spending and output metrics such as patents granted.

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While overall the indicators used in this study aim to measure bilateral linkages, each category of indicators includes a single indicator, which does not measure linkages. Instead, these four indicators measure resources or assets in place within an individual country. These inward-focused indicators are intended to measure the baseline resources base from which the comparator countries built collaboration.

Further detail on the countries selected and indicators used in the Index is given in the accompanying Data Annex, which includes all the data used to inform the selection of countries.

1.4. What is an Index?The concept of indexing is often used in economics and finance to develop a common statistical measurement to represent a group of individual data points distilled down to a simplified comparison. This data can include diverse types of information derived from different sources. Commonly recognized indexes include stock indexes, e.g., Dow Jones Industrial Average, S&P 500, or the GDP Deflator Index. There are also a number of indices focused on competitiveness, high technology, research and development, or information communications technology (ICT). A few relevant examples include: The Global Competitiveness Index produced by the World Economic Forum;

Aggregate Private Sector Metrics

Aggregate Human Capital MetricsAggregate Government Metrics

10.46

10.97

11.88

15.63

20.38

22.92

25.00

0 10 20 30 40

Switzerland

Singapore

Finland

Sweden

Germany

South Korea

Israel

10.73

14.35

19.49

20.98

23.47

24.82

25.00

0 10 20 30 40

Germany

Finland

Sweden

Switzerland

Singapore

South Korea

Israel

5.82

8.31

9.20

11.27

14.48

21.09

25.00

0 10 20 30 40

Finland

South Korea

Sweden

Germany

Switzerland

Singapore

Israel

Aggregate R&D Metrics

11.54

13.84

13.87

17.08

25.00

27.98

34.91

0 10 20 30 40

Finland

Sweden

Singapore

South Korea

Israel

Germany

Switzerland

Exhibit 2: Summary Results by Indicator Category

Benchmarking U.S.–Israel Hi-tech Collaboration

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The Global Innovation Index developed by the Boston Consulting Group; and The ICT Development Index calculated by the International Telecommunication Union. Each of these indexes incorporates disparate datasets to develop a common benchmark to provide insight about the relevant topics.

In order to create an index, the various data points need to be consistent and reflect a common standard or base value to facilitate comparisons. For simplicity, most indices initially link the underlying data to 100, which permits all other information to be expressed relative to this number. A figure of 110 compared to the index value of 100, represents a 10% difference in the underlying data and therefore enables comparisons of specific peers. Indices are often used in time series where comparison of the base value can represent changes over time. Thereby, an entity that receives a value of 100 in the base year and 110 in the second year of an annual index could be described as showing a 10% year over year improvement. So by using indices, analysts can reduce a sizeable dataset into easily understood terms allowing comparison of peers at a given point and can track their movement overtime.

1.5. Summary of FindingsThe U.S.–Israel Innovation Index shows that Israel’s innovation-related relationship with the U.S. is consistently strong in most all indicators included in the Index. Tracking these results over time will show whether that strength is maintained. Results demonstrate that Israel’s relationship to the U.S. in innovation-related activities is stronger than that between the U.S. and any of the other compared countries, as shown in Exhibit 3. The strength of the U.S.–Israel relationship, as compared to that between the U.S. and the other included countries, is comparatively most developed in Government and Private Sector & Industry and comparatively least developed in Research and Development linkages. In the area of Human Capital, linkages between the U.S. and Israel are greater than those between the U.S. and South Korea by only a slight margin.

43.59

58.15

69.40

70.36

73.13

80.82

100.00

0 50 100 150

Finland

Sweden

Singapore

Germany

South Korea

Switzerland

Israel

Aggregate Index Results

Exhibit 3: Summary Index Results

Measuring U.S.–Israel Hi-tech Collaboration

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�� The relative strength of the U.S.–Israel relationship in the Government, Human Capital, and Private Sector categories is the strongest of any of the countries included in the Index.

�� In the Human Capital category, the relative strength of the U.S.–Israel relation-ship is only slightly stronger than that between the U.S. and South Korea.

�� In the Research and Development category, the relative strength of the U.S.–Israel relationship trails the relationship between the U.S. and Switzerland and Germany, while surpassing that between the U.S. and South Korea, Singapore, Sweden, and Finland.

While the aggregate Index results reveal key themes, analyzing the underlying data in each indicator category provides insight into developments and themes within the categorical areas of collaboration represented by the category groupings.

1.6. Methodology and Model Structure OverviewAt its core, the U.S.–Israel Innovation Index is a benchmarking tool designed to track progress towards the goals outlined in the Israel 2028 Vision and Strategy, and provide a statistical foundation to understand the collaborative relationship among government, industry, and people of the United States and Israel in the fields of science and technology. The framework is designed to gather, organize, and standardize benchmarking data to facilitate analysis and evaluate information. The output of the Index focuses on identifying areas where U.S.–Israel collaboration is strong relative to its peers; and likewise, where this relationship is relatively weak. The statistical output of the model provides underlying insight into U.S.–Israel collaboration, comparing this to relationships the United States has with other nations. The statistical findings of the Index, therefore, provide a baseline from which to assess the collaboration across countries and over time. In future years, the U.S.–Israel data for this Year 1 Index will serve as a baseline to compare annual changes.

The U.S.–Israel Innovation Index uses only quantitative metrics, which are normalized to ensure an appropriate comparison among nations that have vastly different sizes, population, and economic output. For example, as Germany has a significantly larger population and economy than Israel, a direct statistical comparison of indicators does not account for the countries’ relative differences. To address these disparities, the U.S.–Israel Innovation Index normalizes data by population or size of economy, (e.g., gross domestic product adjusted for purchasing power parity [PPP], using data from the World Bank).

The framework collects information on specific metrics, sometimes referred to as an indicator, that individually provide insight into a specific aspect of the collaborative relationship. At the same time, metrics are aggregated into categories, e.g., Government, Industry, Human Capital, and Research and Development, to provide a larger viewpoint; the categories are then combined into an overall score. It is important to note that the structure of the Index values each category equally, e.g., 25% of the total value, and within each category,

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each indicator carries the same weight. In other words, each metric has the same relative value within the model with four metrics per category.

The structure and composition of the Index is shown in Exhibit 4 below.

Shaded indicators measure baseline resources present in the country.

The Data Annex (a separate document) provides a listing and description of sources used to compile the data used in the Index.

Exhibit 4: Index Structure

Metric Code Metric Target Measurement Source

GOV-1 Government Budget Appropriations on R&D (GBAORD)

Compares government investment in R&D, indicative of policy support for science and technology

OECD

GOV-2 Inventory of Bilateral Treaties in Science and Technology Areas

Quantifies the number of international agreements in effect in technology-related areas

U.S. Department of State Treaties in Force Pub.

GOV-3 Foreign Operations Account Spending U.S. Department of State

Measures U.S. government funds flowing to target countries U.S. Department of State

GOV-4 Existence of Bilateral Science and Technology Commissions

Identifies whether a bilateral S&T Commission, or similar organization, exists between target countries

IRS

PSI-1 Industry Financed Gross Domestic Expenditure on R&D (I-GERD)

Compares industry investment in R&D, indicative of private sector activity

OECD

PSI-2 U.S. Exports and Imports in Knowledge-Intensive Industries

Tracks magnitude of trade relationship with U.S. (imports/exports) in key knowledge-intensive industries by 4-digit NAICS codes

U.S. International Trade Administration

PSI-3 Activity of MNC and MOFA (Foreign Affiliates)

Measures services supplied to foreign persons by U.S. MNCs through their MOFAs and vice versa

U.S. Bureau of Economic Analysis

PSI-4 Number of Knowledge-Intensive Industry Companies Cross Listed

1) Measures foreign knowledge-intensive companies listed on U.S. exchanges, and 2) Measures U.S. knowledge-intensive companies listed on foreign exchanges

Various Open Source

HC-1 Higher Education Expenditure on R&D (HERD)

Compares education-sector expenditures on R&D OECD

HC-2 Article Co-Authorship Counts article co-authorship between the U.S., Israel, and other comparator countries in Science and Engineering fields

U.S. National Science Foundation

HC-3 U.S. Doctorates Awarded to Foreign Students, S&E Fields

Measures academic exchange between target countries U.S. National Science Foundation

HC-4 Entries Under U.S. H1-B Temporary Work Visas

Counts country of citizenship of recipients of visas U.S. Department of Homeland Security

R&D-1 Gross Domestic Expenditure on R&D (GERD) as a Percent of GDP

Compares actual expenditures on R&D activities, by broad sector of activity

OECD

R&D-2 R&D Expenditure of Foreign Affiliates

Analyzes R&D investment by country from which bilateral R&D investment is originating

U.S. Bureau of Economic Analysis

R&D-3 USPTO Co-Patent Applications Measures collaborative patent applications (i.e., applications from multinational teams including target country) to the USPTO

USPTO

R&D-4 Patent Applications (World) &U.S. Patents Granted by Country of First Listed Inventor

Quantifies patent activity, as proxy measure for innovation activity and output

WIPO USPTO

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2. Benchmarking the U.S.–Israel Relationship Against Other Nations

The U.S.–Israel Innovation Index tracks progress towards the goals outlined in the Israel 2028 Vision and Strategy, and provides a statistical foundation to understand the collaborative relationship among government, industry, and people of the United States and Israel in the fields of science and technology. The Index focuses on understanding U.S.–Israel collaboration in innovation-related activity, and comparing this to relationships the United States has with other nations.

The following section compares the U.S.–Israel relationship with similar relationships the U.S. maintains with other countries. In order to present a common viewpoint, Section 4 compares normalized data, which is benchmarked to Israel at an overall level of 100 basis points. As the benchmark, these basis points break down to 25 points for each category, equating to 6.25 basis points for each of the indicators (4 indicators per category). In other words, the presented scores characterize the relationship between the included countries and the United States. Scores are compared relative to the U.S.–Israel score, which by definition in this first year Index is 6.25 basis points per indicator, and 100 points across the Index. In understanding the results of the Index, it is important to note that 100 is not the maximum score on the Index. For individual indicators, relationships that are more concentrated than the U.S.–Israel relationship will score higher than 6.25.

The first year of the Index reports summary findings for each indicator category and provides discussion of trends and results for selected individual indicators. Detailed raw data on each individual indicator is included in the Data Annex. Subsequent annual editions of the Index will expand this discussion to include year over year changes in the country-by-country relationships.

2.1. Government CategoryMetrics in the Government category measure and analyze the impact of legislation, regulation, and diplomacy on the extent of innovation-related collaboration between the U.S. and the target countries.

The strength of the U.S.–Israel relationship in Government metrics related to innovative activities falls between that of U.S. and Germany, Finland and Sweden and that of the U.S. and South Korea, Switzerland and Singapore. Exhibit 5 presents summary results for the Government section of the Index.

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Exhibit 5: Summary Results – Government Indicators

Raw Data

GOV-1 GOV-2 GOV-3 GOV-4

Government budget appropriations on R&D(million US$, PPP)

Number of treaties in effect in S&T areas between the country and the U.S. as of year-end 2010

U.S. Foreign Operations spending in-country as tracked by the U.S. Department of State (FY2010Actual, US$)

Number of bilateral S&T commissions, or similar organization, that exist between the U.S. and target countries as of year-end 2010

Chile -- 13 $1,950,000 0

Finland $2,170.11 (2010) 5 $0 0

Germany $28,075.28 (2010) 24 $0 0

Israel $1,303.02 (2010) 13 $2,775,000,000 5

Singapore $2,300.00 (2009) 4 $500,000 0

South Korea $14,542.84 (2010) 14 $0 1

Sweden $3,162.00 (2009) 13 $0 0

Switzerland $2,682.99 (2008) 5 $0 0

United Arab Emirates -- 4 $230,000 0

United States $165,316.50 (2009) NA NA NA

Benchmarked Data

GOV-1: R&D BudgetAppropriations

GOV-2: S&TTreaties

GOV-3: U.S. ForeignOps Spending

GOV-4: S&TCommissions

Strength of Relationship

Normalization Factor Used

Raw Data Expressed as Percent of GDP

No NormalizationRaw Data Used

Population No NormalizationRaw Data Used

Finland

Germany

Israel

SingaporeSweden

Switzerland

South Korea

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US–South KoreaUS–Israel, US–Chile

US–Switzerland, US–Finland

US–Singapore, US–UAEUS–UAEUS–SingaporeUS–Chile

US–Israel US–Israel

US–South Korea

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2.1.1. Government Indicators Summary

The Government category is led by Israel, South Korea, and Germany as shown in Exhibit 6.

�� When data on government budget appropriations on research and development (GBAORD) – a baseline resources indicator of policy support for R&D – is normalized (expressed as a ratio to GDP), all countries in the Index are grouped relatively closely (except for South Korea, which is positioned as the clear leader), as shown in the results for the GOV-1 indicator reported in Exhibit 5. However, Israel places at the bottom end of the range.

�� Treaty linkages in science and technology related areas show the relationship measured falling into three groups. Treaty linkages between the U.S. and Germany are the strongest; whereas, links between the U.S. and Switzerland, Finland, Singapore, and the UAE, are the least developed. The relationships between the U.S. and Chile, Israel, and South Korea fall in the middle grouping, as in the results for the GOV-2 indicator reported in Exhibit 5.

�� The unique political relationship between the U.S. and Israel is reflected in the data contained in indicator GOV-3, Foreign Operations Spending of the U.S. Department of State.

�� South Korea and Israel are the only two countries compared in the Index, which benefit from operating government-supported bilateral science and technology commissions with the United States, as shown in the results for the GOV-4 indicator reported in Exhibit 5.

2.1.2. Highlight Discussion: Foreign Operations Spending

Israel receives a significant amount of in-country U.S. government spending on programs tracked by the Department of State. Of the included countries, five received no such funding in FY2010 and Israel’s total of approximately $2.8 billion was more than 1,423 times greater than that of the next largest recipient country, Chile. The relatively large amount of U.S. funds flowing to Israel is likely a reflection of the strong defense activities-related relationship between the two countries. While defense obligations represent a significant component of the overall relationship between the U.S. and Israel, some research and development support and other innovative activities are imbedded within the defense linkage.

2.2. Human Capital CategoryMetrics in the Human Capital category quantify the extent and significance of human resources-related linkages between the U.S. and target countries in science and technology related fields.

The strength of the U.S.–Israel relationship in Human Capital-metrics related to linkages in innovative activities leads that of all included countries in the Index,

10.46

10.97

11.88

15.63

20.38

22.92

25.00

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Switzerland

Singapore

Finland

Sweden

Germany

South Korea

Israel

Exhibit 6: Aggregate Government Results

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although the assessed strength of the U.S.–South Korea relationship is only slightly below that between the U.S. and Israel. Germany’s relationship with the U.S. in Human Capital-related linkages is the least concentrated of any of the included countries. Exhibit 7, below, presents summary results for the Human Capital section of the Index.

Exhibit 7: Summary Results – Human Capital Indicators

Raw Data

HC-1 HC-2 HC-3 HC-4

Higher education expenditure on R&D (HERD) (as a percent of GDP)

Count of article co-authorship between U.S. and target country in Science and Engineering fields

Count of U.S. Doctorates awarded to foreign students from target country in S&E fields

Count of number of entries to U.S. under H1-B visas by country of citizenship of visa-holder

Chile -- -- 66 (2009) 2,229 (FY2010)

Finland 0.76% (2010) 1,069 (2008) 5 (2009) 412 (FY2010)

Germany 0.49% (2009) 9,950 (2008) 169 (2009) 8,380 (FY2010)

Israel 0.54% (2010) 2,232 (2008) 69 (2009) 3,671 (FY2010)

Singapore 0.63% (2009) 881 (2008) 56 (2009) 2,176 (FY2010)

South Korea 0.37% (2008) 3,911 (2008) 1,174 (2009) 11,815 (FY2010)

Sweden 0.91% (2008) 2,508 (2008) 16 (2009) 1,789 (FY2010)

Switzerland 0.72% (2008) 3,389 (2008) 18 (2009) 1,376 (FY2010)

United Arab Emirates -- -- <5 (2009) 12 (FY2010)

United States 0.36% (2008) NA NA NA

Benchmarked Data

HC-1: Education Expenditure on R&D

HC-2: Co-authorship

HC-3: U.S. Doctorate Degrees Awarded

HC-4: H1-B VisaEntries




Population Population Population

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Switzerland

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US–UAE

US–SingaporeBenchmark

US–Switzerland

US–IsraelUS–Sweden

US–South Korea

US–SingaporeUS–Israel US–Israel

US–South KoreaUS–SwedenUS–SwitzerlandUS–ChileUS–GermanyUS–Finland

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US–SwedenUS–Germany

US–Finland

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2.2.1. Human Capital Indicators Summary

The Human Capital category is led by Israel and South Korea; with a secondary group of Switzerland, Sweden, and Singapore trailing the leaders as shown in Exhibit 8 below.

�� When data on higher education expenditure on research and development (HERD) – a baseline resources indicator – is normalized (expressed as a ratio to GDP), all countries in the Index are grouped somewhat closely, as shown in the results for the GOV-1 indicator reported in Exhibit 7. Israel places in the middle of the range.

�� With the exception of the leading U.S.–Switzerland relationship, per capita tallies of co-authored scientific journal articles between the U.S. and the target countries are also closely grouped for this indicator – HC-2 – as shown in Exhibit 7.

�� The U.S. and South Korea have a strong relationship in academic exchange in science and engineering fields, as indicated by the results for the HC-3 indicator as shown in Exhibit 7. The South Korea–U.S. relationship leads the benchmarked results for U.S. doctoral degrees awarded to students from the target countries, on a per capita basis; while the U.S.–Israel relationship places second. The relationship between the U.S. and the European countries included in the Index trails in this indicator.

�� Benchmarked results for H1-B entries into the United States, on a per capita basis, are closely grouped for all countries included in the Index. However, the U.S.–Israel relationship leads in this indicator – HC-4 – as shown in Exhibit 7. This indicates a comparatively stronger relationship in technical workforce draw from Israel – as well as from Singapore, which is slightly below Israel - to the U.S. than for the other countries.

2.2.2. Highlight Discussion: H1-B Entries

The U.S. H-1B Visa allows temporary entry into the U.S., on a non-immigrant basis, for employment in specialty occupations. A "specialty occupation" is defined as one requiring theoretical and practical application of a body of highly specialized knowledge in a field of human endeavor.5 Example fields covered under H1-B visas include: architecture, engineering, mathematics, physical sciences, social sciences, biotechnology, and medicine. Tracking entries under H1-B visas provides an indicator to track flows of highly-skilled workforce between the U.S. and target countries. Of the countries included in the Index, South Korea, Germany, and Israel are the three countries from which the largest number of H1-B entries into the U.S. originate.

5 United States Code, Title 12, § 1184. Admission of Nonimmigrants

10.73

14.35

19.49

20.98

23.47

24.82

25.00

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Germany

Finland

Sweden

Switzerland

Singapore

South Korea

Israel

Exhibit 8: Aggregate Human Capital Results

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Exhibit 9, below, plots the number of H1-B entries into the U.S. from Index countries over the most recent four years. Overall entries under H1-B visas have declined – for all included countries except South Korea – over the last four years for which data is available. In the most recent year, the decline shows signs of stabilizing, and entries from South Korea actually show a sharp uptick. When expressed as a percent share of total H1-B entries, declines in entries are slight for most countries, except Germany, which shows a sharp decline; and South Korea, which shows an increase.

2.3. Private Sector and Industry CategoryIndicators in the Private Sector and Industry category measure industry commercialization and coordination between the U.S. and the target countries.

The strength of the U.S.–Israel relationship in Private Sector and Industry metrics related to commercialization and coordination in innovative activities leads that of all included countries in the Index. Finland’s relationship with the U.S. in Private Sector and Industry-related linkages is the least concentrated of any of the included countries. Exhibit 10, on the following page, presents summary results for the Private Sector and Industry section of the Index.

Fiscal Year 2007

Fiscal Year 2008

Fiscal Year 2009

Fiscal Year 2010

Chile

Finland

Germany

Israel

Singapore

South Korea

Sweden

Switzerland

United Arab Emirates

Fiscal Year 2007

Fiscal Year 2008

Fiscal Year 2009

Fiscal Year 2010

As Percent of Total H1-B EntriesEntries to the U.S. Under H1-B Visas

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4000

6000

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10000

12000

14000

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1.50%

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Exhibit 9: Indicator HC-4, H1-B Entries, in Time Series

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Raw Data:

Exhibit 10: Summary Results – Private Sector and Industry Indicators

Raw Data

PSI-1 PSI-2 PSI-3 PSI-4

Industry Financed Gross Domestic Expenditure on R&D (GERD)(as percent of GDP)

Magnitude of trade relationship with U.S. (imports + exports) in key knowledge-intensive industries by 4-digit NAICS codes (million US$)

Magnitude of U.S. trade (imports + exports) in goods and services supplied to foreign persons through U.S. and foreign affiliates of multinational companies (million US$)

Number of knowledge-intensive industry companies cross listed on stock exchanges

Imports(2010)

Exports(2010)

Imports(2008)

Exports(2008)

Chile -- $24.7 $2,208.7 $217.0 $206.0 0

Finland 2.70% (2009) $1,236.9 $666.3 -- -- 2

Germany 1.80% (2008) $22,399.9 $22,234.9 $2,093.0 $1,368.0 493

Israel 3.69.% (2008) $8,674.2 $2,759.2 $1,035.0 $220.0 37

Singapore 1.70% (2008) $10,303.7 $12,282.9 $493.0 $977.0 2

South Korea 2.45% (2008) $19,280.6 $10,886.2 $320.0 $505.0 0

Sweden 2.13% (2009) $3,618.0 $2,039.6 $320.0 $1,144.0 1

Switzerland 2.04% (2008) $11,546.8 $4,755.0 $713.0 $1,765.0 2

United Arab Emirates -- $19.3 $4,063.1 -- 0

United States 1.87% (2008) NA NA

Benchmarked Data

PSI-1: Industry R&D Expenditure

PSI-2: U.S. Hi-tech Trade

PSI-3: Foreign Affliates Activity

PSI-4: Cross-listed Companies




GDP GDP GDP

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Germany

Israel

Singapore

SwedenSwitzerland

South Korea

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US–South Korea

US–Chile

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US–UAEUS–Singapore

US–Switzerland

US–Israel

US–SwedenUS–South Korea

US–Singapore

US–Switzerland

US–Germany

US–Finland

US–Switzerland

US–Sweden

US–Germany

Benchmark

Chile


US–ChileUS–Finland US–Sweden

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2.3.1. Private Sector and Industry Indicators Summary

The Private Sector and Industry category is led by the relationship between the U.S. and Israel as shown in Exhibit 11 below. On average, the relative assessed concentration of the relationship between the U.S. and the target countries is lowest in this category as compared to the other three indicator categories. This perhaps suggests that collaborative linkages have the most room for growth in the Private Sector and Industry category.

�� When data on industry-financed gross domestic expenditure on R&D (I-GERD) is compared on a normalized (expressed as a ratio to GDP) basis, it is seen that Israeli industry invests heavily in R&D relative to the other countries in the Index. This is highlighted by Israel’s leadership in the results for indicator PSI-1 as shown in Exhibit 10.

�� The magnitude of U.S.–Israel trade in high-technology goods is high, placing the U.S.–Israel relationship in high-technology trade near the top of the benchmarked results for indicator PSI-2 (trailing only the relationship between the U.S. and Singapore), as shown in Exhibit 10. However, the relationship between the U.S. and Singapore significantly outpaces all other included countries.

�� Israel’s strength as a high technology exporter to the U.S. is also highlighted in the results for indicator PSI-3, which compares the included countries’ relationship to the U.S. based on the magnitude of trade in the transactions of affiliates of multinational companies. An affiliate is a subsidiary or office of a U.S. company located in a foreign country or conversely, a subsidiary or office of a non-U.S. company located in the U.S. Affiliate transactions measures the total amount (magnitude) of trade in goods and services between affiliates.

�� Amongst the group of countries included in the Index, there is a wide difference in the concentration of the relationship with the U.S. for indicator PSI-4, which tracks the number of dual-listed or cross-listed stocks on exchanges in the U.S. and target countries. Germany is well ahead of the other included countries, with nearly 500 dual-listed stocks (German stock on U.S. markets or vice versa). Israel ranks second with nearly 40 such listings, which is more than the total of the remaining countries combined. However, when this indicator is compared relative to GDP, Israel is benchmarked above Germany.

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8.31

9.20

11.27

14.48

21.09

25.00

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South Korea

Sweden

Germany

Switzerland

Singapore

Israel

Exhibit 11: Aggregate Private Sector and Industry Results

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2.3.2. Highlight Discussion: High-Technology Trade

The Private Sector and Industry category of the Index includes two indicators, PSI-2 and PSI-3, which measure trade flows in high technology goods and/or services between the U.S. and the included countries. Data for both indicators suggest that Israel shows strength (relative to many of the other included countries) as an exporter of high-technology goods and services to the U.S. The trade balance in overall high-technology goods between the U.S. and Israel distinctly leans towards Israeli exports (U.S. imports). Data for indicator PSI-2 shows that Israel has the third largest surplus of trade with the U.S. amongst the included countries, totaling approximately $5.9 billion in 2010. In absolute terms (raw data), the country with the largest trade surplus with the U.S. was South Korea, which had a positive high-technology goods trade balance with the U.S. of $8.4 billion in 2010. However, the South Korean economy was approximately 4.7 times larger than Israel’s economy in 2010.

Indicator PSI-3 measures trade flows in affiliate transactions within multinational companies in high-technology goods and services. Within affiliate transactions, Israel had a positive trade balance in 2008 (the most recent data available as of September 1, 2011) with the U.S. of more than $800 million – the highest raw total within the group of included countries. In the next closest country – Germany – transactions between affiliates represented a trade surplus of $725 million. For contrast, the German economy was approximately 14.7 times larger than Israel’s in 2008.

2.4. Research and Development CategoryMetrics in the Research and Development category assess R&D collaboration between the U.S. and the target countries. The statistics are cross-cutting, quantifying activity levels across government, industry, and academia.

The strength of the U.S.–Israel relationship in the Research and Development linkage metrics category falls between that of U.S.–German and Swiss relationships and that of the U.S.–South Korean and Singaporean relationships. Exhibit 12, on the following page, presents summary results for the Government section of the Index.

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Exhibit 12: Summary Results – Research and Development Indicators

Raw Data

R&D-1 R&D-2 R&D-3 R&D-4

Gross domestic expenditure on R&D (as percent of GDP)

Tabulates total R&D performed by U.S. affiliates of foreign companies in the United States by country, and vice-versa(US$, million)

Measures collaborative patent applications (i.e., applications from multinational teams including target country) to the USPTO

Patent applications to USPTO and patents granted to U.S. by National Patent Office, by nationality of first-listed inventor (most recent year available)

Chile -- $48 (2007) 5 (2010) 1,133

Finland 3.84% (2010) $774 (2008) 29 (2010) 1,159

Germany 2.78% (2009) $12,559 (2008) 1,014 (2010) 16,011

Israel 4.25% (2010) $1,261 (2008) 347 (2010) 4,434

Singapore 2.35% (2009) $741 (2008) 107 (2010) 4,043

South Korea 3.36% (2008) $1,227 (2008) 128 (2010) 22,399

Sweden 3.62% (2009) $1,897 (2008) 350 (2010) 1,479

Switzerland 3.00% (2008) $8,049 (2008) 246 (2010) 1,669

United Arab Emirates -- $4 (2008) 4 (2010) 7

United States 2.79% (2008) NA NA NA

Benchmarked Data

R&D-1: R&D as Percent GDP

R&D-2: R&D Spend of Foreign Affliates

R&D-3: USPTO Co-Patents

R&D-4: Total Patent Activity




GDP Population GDP

BenchmarkFinland

Germany

Israel

Singapore

Sweden

SwitzerlandSouth Korea US–Germany

US–South Korea US–Chile

US–Singapore

US–Singapore

US–Switzerland

US–IsraelUS–Sweden US–South Korea

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2.4.1. Research and Development Indicators Summary

The Research and Development category is led by the relationship between the U.S. and Switzerland with the U.S.–Israel relationship falling in the middle of the range, as shown in Exhibit 13 below.

�� In general, benchmarked scores for the relationship between the U.S. and most of the countries in the Index are closely grouped for each individual indicator in the Research and Development category relationship, as shown in Exhibit 12. The close grouping is especially evident in the results for indicator R&D-1 – Gross Domestic Expenditure on R&D (GERD), expressed as a percent of GDP.

�� The relative concentration of the U.S.–Switzerland relationship far outpaces that of the U.S. and any other included country in bilateral flows of R&D expenditure by affiliates of multinational companies, as shown in the results for the R&D-2 indicator reported in Exhibit 12.

�� The relationship between the U.S. and Germany in co-patent applications to the USPTO (measuring the number of patent applications to the USPTO from joint teams between the U.S. and the target country, which include participants from the target country as a second-listed inventor or lower) is strong. This is shown in the U.S.-German relationship leadership of indicator R&D-3, as reported in Exhibit 12. The strong positioning of the U.S-German relationship in this indicator contributes greatly to the U.S.–Germany relationship’s second place position in the overall Research and Development indicator category.

�� Benchmarked results for global patent activity by first-listed inventor (a composite indicator measuring the sum of the number of patents granted in technology fields by the USPTO to the target country to the U.S. and the number of patent applications from the U.S. to the national patent offices in the target countries), shows two groupings emerging within the countries

included in the Index. The relationships between the U.S. and South Korea, Israel, and Singapore represent the leadership group within this indicator – R&D-4 – as shown in Exhibit 12. The remaining countries are closely grouped in position showing less developed patent linkages with the U.S.

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13.84

13.87

17.08

25.00

27.98

34.91

0 40

Finland

Sweden

Singapore

South Korea

Israel

Germany

Switzerland

Exhibit 13: Aggregate Research and Development Results

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2.4.2. Highlight Discussion: Patenting

The U.S. Israel Innovation Index includes two indicators, R&D-3 and R&D-4, which assess patent applications and activity. Indicator R&D-3 compares co-patent applications to the USPTO. This data tallies the number of patent applications to the USPTO in a given year which include, at the level of second-listed inventor or lower, at least one person from the target country along with at least one person from the U.S., at any listed inventor position. As such, this indicator provides a measure of collaborative patent activity between the U.S. and the target countries. Indicator R&D-4 measures patent activity by first-listed inventor. It is a composite indicator which sums a) patent applications to the USPTO from inventors in the target countries in technology fields and b) patents granted to U.S. inventors from the national patenting offices of the target countries. As such, this indicator provides a proxy measure of overall patenting links between the U.S. and the target countries.

When time series data on Indicator R&D-3, co-patent activity, is analyzed, an interesting trend is revealed. Collaborative patents applications to the USPTO involving joint teams including the U.S. and the individual target countries has declined over the past four data years for all countries included in the Index, as shown in Exhibit 14 below. This trend could be indicative of overall global economic trends, or it could represent a shift in patent activity away from the U.S. and potentially toward international patenting frameworks.

2.5. Future Directions The U.S.–Israel Innovation Index will be produced annually. The USISTF will incrementally improve the Index through refinement to the structure and analytical framework, and through feedback received to this first year of the Index.

Chile

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United Arab0

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Exhibit 14: Indicator R&D-3, Co-patent Applications, in Time Series

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In its first year, the Index has produced comparative statistical rankings of the relationships between the U.S. and the included countries, benchmarked to the relationship between the U.S. and Israel. Rankings provide a basis for qualitative discussion of findings, supported by quantitative information derived from the individual indicators used to compile the Index. However, rankings do not, in and of themselves, provide identification of trends that might underlie the rankings. In future years of the Index, this year’s U.S.–Israel score will serve as the benchmark value for the entire Index. This will allow changes in the U.S.–Israel relationship over the year to be discussed in comparison to this year’s ranking. It will also allow similar analyses for the other included countries’ relationship with the U.S. Over multiple yearly editions of the Index time series data will emerge showing trends in the measured relationships.

Time series data will also be developed on the individual indicators used to compile the Index. In this first year, time series data was presented and/or included in the underlying dataset where available. In future yearly editions of the Index, annual updates to the existing indicator dataset will result in the development of time series data. Development of time series data will allow a more holistic discussion of trends within the individual indicators than was possible in this first year.

In addition to developing time series data, the individual indicators used in the Index will be evaluated and refined. During the development of the initial Index in this first year, limitations of the included indicators were identified. For example, the information sources used to compile indicator GOV-2, Inventory of Treaties, captured formal treaty-level agreements, but did not holistically capture less formal cooperative arrangements such as Memorandums of Understanding and transnational agency-to-agency agreements. Similarly, the dataset used to develop indicator GOV-4, Bilateral Commissions, accurately tracks organizations organized in the U.S. as 501(c)-3 entities, but does not track alternative organizational forms. Data limitations such as these will be addressed through evaluation of alternative data sources as augmentations or replacements to indicators used in the initial year.

In this inaugural year of the Index, indicators were thematically grouped into the four categories of Government, Human Capital, Private Sector & Industry, and Research & Development. Alternative frameworks for organizing the indicators exist. For example, indicators could be classified as asset indicators, process indicators, or outcome indicators. Future years of the Index may include secondary classification of indicators along a different framework, in addition to the four categories used this year. Such an addition would provide an alternative framework for the discussion of trends elucidated by further development of time series data in future editions of the Index.

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3. The U.S.–Israel Relationship in Science and Technology

As a companion to the U.S.–Israel Innovation Index, the USISTF has developed detailed statistics-based profiles of the U.S. and Israel. Drawing on the indicators used in the Index and other sources, this information provides a characterization of innovation-related resources in both countries, and describes linkages between the two countries in each of the indicator categories: Government, Human Capital, Private Sector and Industry, and Research and Development. Development of similar profiles for the other countries used as comparators in the Index would provide additional contextual material to the themes discussed in the Index.

3.1. Science and Innovation Profiles of the U.S. and Israel

3.1.1. Israel Innovation Profile

Israel leads the world in R&D spending as a percentage of national GDP.6 This datapoint, which reflects what the U.S. National Science Foundation calls "R&D intensity," is a key indicator of the relative importance that Israeli government and society ascribe to science, technology, and innovation. Equally significant, Israel has substantially increased its R&D focus over the past decade. Israeli R&D expenditures as a percentage of GDP grew from 3.58% in 1999 to 4.86% in 2008.7 Overall, Israel invests nearly $10 billion annually in R&D.

Israel’s science and engineering human capital is similarly characterized by a high R&D intensity. The national workforce features high ratios of skilled science and engineering human capital as a proportion of the population, with about 135 university-educated engineers and scientists per 10,000 citizens.8 The country’s seven major research universities are complemented by a network of technical institutes. Enabled largely by government funding, approximately 30,000 Israelis were engaged in academic science and engineering research in 2007.9

6 OECD, Main Science and Technology Indicators, 20107 U.S. National Science Foundation (NSF) Science and Engineering Indicators 20108 European Commission. "Israel’s R&D Capacity –A Promising Land" http://cordis.europa.eu/israel/rd_en.html 9 Ibid.

Exhibit 15: Israeli Science, Technology, and Innovation Summary

Indicator Categories

Government

• Government-funded universities and technology incubators, as well as R&D projects, employ nearly 30,000 Israelis in basic science and research.


• A smaller scale, but advanced, private sector employs nearly 60,000 researchers and technicians in commercially-focused R&D.

• Major multinational R&D companies have strong local presence, including research facilities, in Israel.

Human Capital

• Seven major universities, complemented by numerous technical institutes, provide Israel with a very high ratio of 135 university-educated engineers and scientists per 10,000 in population.


• Leading sectors include aerospace, information technology, biotechnology, energy, and an emerging nanotechnology sector.

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Academic researchers are highly aligned with Israel’s commercial R&D sector. Universities and technical institutes benefit from strong ties with companies, and often serve as technology incubators for startups and enterprises. Israeli corporate research parks are commonly located near universities, generating collaborative cluster economic benefits between academia and the business community.10

Israel’s private-sector R&D is financed by a combination of government spending and commercial revenues, which are then typically re-invested to develop follow-on technologies. Government priorities, especially national defense, have supported indigenous aerospace manufacturers such as Israel Aerospace Industries (IAI), Elbit Systems, and Rafael. These domestic R&D leaders are complemented by a large number of multinational corporations with facilities in Israel, including Intel, IBM, Motorola, Applied Materials, BMC, Creo, Marvell, Cisco Systems, and Hewlett Packard (HP). Altogether, the Israel’s Central Statistics Bureau reports that approximately 201,000 Israelis were employed in private sector firms engaged in research and development in 2008 (the most recent data available).11

Israel’s combination of high government R&D spending and a robust commercial base have given it a large science and technology footprint relative to its small geographic size and population. As a result, the Israeli economy is characterized by a number of high-tech sectors, including aerospace, computing, and biotechnology. Israel is also a major exporter of innovative products and services, with exports constituting one-quarter of its GDP.12

A summary of Israel’s core innovation indicators is provided in Exhibit 16, on the following page.

3.1.2. United States Innovation Profile

The United States has the largest R&D sector of any single country, accounting for 33% of worldwide R&D spending, valued at $397.6 billion, in 2009. Over the past decade, U.S. R&D spending as a percentage of GDP has remained fairly constant. In 1999, the United States invested 2.64% of its GDP in R&D; in 2009, the ratio was 2.77%. This proportion places the United States eighth in the world in terms of national R&D intensity.13

As the United States has migrated from a primarily industrial to a services-based economy, R&D has become accepted by economists as a critical contributor to, and indicator of, U.S. economic performance. R&D permeates all layers of the U.S. economy, including not only traditional technical sectors such as aerospace, chemicals, energy, information and communications technology, and

10 Ibid.11 Israel Central Statistics Bureau. "Statistical Abstract of Israel 2011."12 Central Intelligence Agency. "CIA World Factbook." https://www.cia.gov/library/publications/the-world-factbook/ 13 U.S. National Science Foundation (NSF) Science and Engineering Indicators 2010

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Sources: OECD, International Telecommunications Union, CIA World Fact Book

Exhibit 16: Core Statistics of Israel

Innovation Overview

Investment Statistics

National Budget $69.08 billionGross Fixed Investment as

Percentage of GDP, (Global Rank) 17.4% (123)

Education Expenditure as Percentage of GDP (Global Rank) 5.9% (30)

Military Expenditure as Percentage of GDP (Global Rank) 7.3% (6)

Gross Domestic Expenditures on R&D as Percentage of GDP 4.25%

Labor StatisticsLabor Force (Global Rank) 3.08 million (102)

Labor Force by Sector• Agriculture: 2%• Industry: 16%• Services: 82%

2010 Unemployment (Global Rank) 6.7% (63)

ICT StatisticsInternet Hosts (Global Rank) 1.689 million (35)Internet Users (Global Rank) 4.525 million (51)

Fixed Teledensity 45.33%Mobile Teledensity 125.84%

Socio-Economic Overview

PopulationArea (Global Rank) 20,770 square km (154)

Population (Global Rank) 7,430,000 (97)

Population Growth (Global rank) 1.584% (73)Median Age 29.4 years

Urbanization Rate: 92%

EthnicityJewish 76.4% (of which Israel-born 67.1%, Europe/America-born 22.6%, Africa-born 5.9%, Asia-born 4.2%); non-Jewish 23.6% (mostly Arab)

Religion Jewish 75.5%, Muslim 16.9%, Christian 2.0%, Druze 1.7%, other 3.8%

Languages Hebrew (official), Arabic used officially for Arab minority, English most commonly used foreign language

Literacy 97.1%

EconomicGDP (nominal) US$217 billion (40)

GDP (PPP) (Global Rank) US$217 billion (51)GDP per capita (PPP)

(Global Rank)$28,726 (31)

2009-2010 Growth 3.4%

Technology Trade

2010 Exports (Rank) / Imports (Rank)

$54.31 billion(49) / $55.6 billion (45)

Major Export Goods• Machinery and equipment• Software• Agricultural products• Chemicals• Textiles

Top 5 Export Partners Top 5 Import PartnersU.S. 35.05% U.S. 12.35%

Hong Kong 6.02% China 7.43%Belgium 4.95% Germany 7.1%

Italy 4.49% Switzerland 6.94%UK 4.03% Belgium 5.42%

Research and Development Resources

Gross Domestic Expenditure on R&D by Sector, 2008 (US$ Billions)

Israeli Business Enterprise R&D Personnel by Occupation, 2007

Business Enterprise

Researchers 43,500Technicians 9,299

Other Support Staff 4,199Total 56,998

Private, Non-Profit$0.3B (3%)

Higher Education$1.1B (12%)

Business & Enterprise$7.5B (81%)

Government$0.4B (4%)

Total:U.S.$9.3 Billion

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machinery; but non-technical business, finance, and transactional processes and services as well. R&D also plays a growing role in agriculture, with increasing R&D investments in genetically modified crops and farming processes.

U.S. R&D is led by extensive private sector investment in science and technology. U.S. businesses accounted for about $268 billion in R&D spending in 2009, some two-thirds of total national R&D investment. However, this extensive business investment in both basic and applied R&D is funded not only by commercial interests, but also by the U.S. federal government, which spent over $100 billion on non-classified R&D, amounting to about 26% of total U.S. R&D spending, in 2009.14

U.S. private sector R&D is further enabled by well-developed capital markets, including venture capital entities that fund more experimental science and technology efforts that feature greater risks, but also

potentially substantial returns, on investment. A robust commercial marketing sector assists in converting technologies into products and services for the marketplace, enabling profits that are partially re-invested in further R&D development.

The U.S. R&D establishment is underpinned by a network of nearly 6,000 universities and colleges, many of which are rated among the world’s leading technical institutions. The institutions of higher education serve as research and technology incubators, accounting for about 56% of basic science and research as of 2009—of which 57% was funded by the federal government. They also maintain a strong R&D human capital base, graduating more than 225,000 science and engineering first-degree (bachelor’s-level or equivalent) students, and more than 20,000 science and engineering doctoral students, per year.

A summary of core U.S. innovation indicators is provided in Exhibit 18, on the following page.

14 U.S. National Science Foundation (NSF) Science and Engineering Indicators 2010

Exhibit 17: U.S. Science, Technology, and Innovation Summary

Indicator Categories

Government

• Federal government invests more than $100 billion annually, constituting 26% of national R&D spending, including 57% of university basic research funding.


• Two-thirds of national R&D investment derives from the private sector, with specialization in aerospace, agriculture, computing, chemicals, energy, and consumer goods.

Human Capital

• Second-largest number of universities in the world, serving as technology incubators.

• Strong science and engineering human capital base—but not necessarily a growing one.


• World’s largest investor in R&D, directed by extensive government and military funding, complemented by vast private sector spending for both public projects and commercial goals.

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Exhibit 18: Core Statistics of the United States

Innovation Overview

Investment Statistics

National Budget $3.456 trillionGross Fixed Investment as

Percentage of GDP, (Global Rank) 12.0% (143)

Education Expenditure as Percentage of GDP (Global Rank) 5.5% (43)

Military Expenditure as Percentage of GDP (Global Rank) 4.06% (24)

Gross Domestic Expenditures on R&D as Percentage of GDP 2.78%

Labor StatisticsLabor Force (Global Rank) 154.9 million (4)

Labor Force by Sector

• Manufacturing, extraction, transportation, and crafts: 20.3%

• Managerial, professional, and technical: 37.3%

• Sales and office: 24.2%• Other services: 17.6%

2010 Unemployment (Global Rank) 9.6% (108)

ICT StatisticsInternet Hosts (Global Rank) 439 million (1)Internet Users (Global Rank) 245 million (2)

Fixed Teledensity 44.81%Mobile Teledensity 90.78%

Socio-Economic Overview

PopulationArea (Global Rank) 9,826,675 square km (3)

Population (Global Rank) 309,997,000 (3)

Population Growth (Global rank) 0.96% (118) Median Age 36.9 years

Urbanization Rate: 82%

Ethnicity

White (including Latino) 79.96%; Black 12.85%; Asian 4.43%, Amerindian and Alaska Native 0.97%, Native Hawaiian and Other Pacific Islander 0.18%; two or more races 1.61%

Religion

Protestant 51.3%, Roman Catholic 23.9%, Mormon 1.7%, other Christian 1.6%, Jewish 1.7%, Buddhist 0.7%, Muslim 0.6%, other or unspecified 2.5%, unaffiliated 12.1%, none 4%

LanguagesEnglish 82.1%, Spanish 10.7%, other Indo-European 3.8%, Asian and Pacific Island 2.7%, other 0.7%

Literacy 99%

EconomicGDP (nominal) US$14.58 trillion (1)

GDP (PPP) (Global Rank) US$14.58 trillion (1)GDP per capita (PPP)

(Global Rank)$47,084 (8)

2009-2010 Growth 2.8%

Technology Trade

2010 Exports (Rank) / Imports (Rank)

$1.28 trillion (4) / $1.94 trillion (1)

Major Export Goods• Capital goods (transistors, aircraft, motor vehicle

parts, computers, telecommunications equipment) • Industrial supplies (organic chemicals) • Consumer goods (automobiles, medicines) • Agricultural products (soybeans, fruit, corn)

Top 5 Export Partners Top 5 Import PartnersCanada 19.37% China 19.3%Mexico 12.21% Canada 14.24%

China 6.58% Mexico 11.12%Japan 4.84% Japan 6.14%

UK 4.33% Germany 4.53%

Research and Development Resources

Gross Domestic Expenditure on R&D by Sector, 2008 (US$ Billions)

U.S. Business Enterprise R&D Personnel by Sector, 2007

Business Enterprise

Manufacturing 717,100Services 400,100

Others 13,300Total 1,130,500

Private, Non-Profit$15.6B (4%)

Higher Education$51.2B (3%)

Business & Enterprise$289.1B (73%)

Government$42.2B (10%)

Total:U.S.$398 Billion

Sources: OECD, International Telecommunications Union, CIA World Fact Book

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3.2. Describing the U.S.–Israel Relationship The relationship is strong and dynamic, and is strongly underpinned by scientific and technology relationships that link a broad set of governmental, commercial, academic, and human capital factors in both countries. Exhibit 19, below, provides the raw data used to measure the U.S.–Israel relationship prior to being normalized and benchmarked for comparison in the Index.15

15 In the exhibit above, it is important to note the information for the U.S. is not applicable across a number of metrics, e.g., the U.S. cannot have a science and technology treaty with itself, since most of the metrics were selected to compare the relationship that the U.S. maintains with Israel vis-à-vis the relationship the U.S. maintains with the peer group.

Exhibit 19: Raw Data on U.S. and Israel IndicatorsU.S. Israel

Government Benchmarks

GOV-1: Government Budget Appropriations on R&D (GBAORD) by Socioeconomic Objective

$165,316.50(US$ Million, PPP, 2009)

$1,303.02(US$ Million, PPP, 2010)

GOV-2: Inventory of Bilateral, Treaties, Cooperative Agreements, Trade Agreements

n/a 13

GOV-3: Foreign Operations Account Spending U.S. Department of State

n/a $2,775,000,000(US$, FY2010)

GOV-4: Number of Bilateral Science and Technology Commissions

n/a 5

Human Capital Benchmarks

HC-1: Higher Education Expenditure on R&D (HERD), as percent of GDP

0.36% (2008) 0.54% (2010)

HC-2: Article Co-Authorship n/a 2,232 (2008)

HC-3 U.S. Doctorates Awarded to Foreign Students, S&E Fields

n/a 69 (2009)

HC-4: Entries Under US H1-B Temporary Work Visas

n/a 3,671 (FY2010)

Private Sector and Industry Benchmarks

PSI-1: Industry Financed Gross Domestic Expenditure on R&D (I-GERD), as percent of GDP

1.87% (2008) 3.69% (2008)

PSI-2: U.S. Exports and Imports in Knowledge-Intensive Industries

n/a $11,433,421,457(US$, 2010)

PSI-3: Activity of MNC and MOFA (foreign affiliates)

n/a $1,255(US$ Million, 2009)

PSI-4: Number of Knowledge-Intensive Industry Companies Cross Listed

550 (2011) 37 (2011)

Research and Development Benchmarks

R&D-1: Gross Domestic Expenditure on R&D as % GDP

2.77% (2008) 4.25% (2010)

R&D-2: R&D Expenditure of Foreign Affiliates n/a $1,261(US$ Million, 2008)

R&D-3: USPTO Co-Patent Applications n/a 247 (2010)

R&D-4: Patent Applications (World) & U.S. Patents Granted by Country of First Listed Inventor

n/a 4,434 (2009/2010)

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3.3. Government MetricsThe U.S. and Israeli governments maintain strong strategic ties that cover strategic issues of national defense to areas of cultural exchange and education. Specifically focusing on governmental R&D spending, the United States government spent $165.3 billion on government-sponsored R&D in 2009, compared to $1.3 billion spent by Israel in the same year – a significant difference when the data is not adjusted for population and size of the economy. When compared as a percentage of the overall budget, U.S. appropriations for R&D accounted for 1.2% of the total federal spending in 2009 compared to 0.6% for Israel. By population, the U.S. spent $538 per capita; more than three times more than the $164 per capita spent by Israel. So, at the high level, even when adjusted, the U.S. government significantly outspends Israel. Exhibit 20, below, provides OECD data for this indicator for the last three years available.

One of the most important facets of the U.S.–Israel relationship can be measured by the amount of U.S. foreign assistance to the country; amongst the compared countries Israel is the largest recipient of such aid. Actual assistance in the FY2010 budget was $2.8 billion, with estimates for $3.0 billion in FY2011. Per capita, this translates into more than $350 per Israeli citizen per year. To further support this unique position, Israel is one of only a few countries where specialized bilateral commissions focused on science and technology between the country and the U.S. have been developed (e.g., the U.S.–Israel Science and Technology Foundation). Of the countries included in our peer group, the only other similar commission is maintained with South Korea: the Korea–U.S. Science Cooperation Center.

In addition to the U.S.–Israel Science and Technology Foundation, bilateral science and technology linkages between the U.S. and Israel are further supported and developed by three bilateral foundations: the United States–Israel Binational Agricultural Research and Development Fund (BARD), the Israel–U.S. Binational Industrial Research and Development Foundation (BIRD), and the United States–Israel Binational Science Foundation (BSF). Each of these organizations provides grants for scientific collaboration between the two nations and provides services to support joint commercial ventures between the countries. BIRD, BARD, and BSF are each codified in formal treaty relationships between the U.S. and Israel.

The robustness of this relationship impacts how the U.S. and Israeli government interact across a broad spectrum of areas, but also positively impacts interactions led by other societal actors in the private sector and academia.

Exhibit 20: Government Budget Appropriations on Research and Development

Country 2010 2009 2008 2007

United States S165,316.50 $144,390.80 $141,890.30

Israel $1,303.02 $1,276.65 $1,260.98 $1,139.71

Units: million current PPP $

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3.4. Human Capital MetricsThe U.S.–Israel relationship also has a significant human capital component that includes the two-way exchange of ideas, skills, and education between the two countries. From an investment point of view, in 2008, institutions of higher education in the United States spent approximately $51 billion on R&D activities, a nearly 9% increase over a similar expenditure in 2006 of $47 billion. Institutions in Israel, on the other hand, spent nearly 50 times less, or $1.2 billion in 2008 and posted an increase in spending by approximately 5%. These trends are presented in Exhibit 21.

The Index also looks at collaboration and interaction at the people-level by evaluating the number of technical articles written together by American and Israeli authors, the relative number of Israelis receiving technical degrees in the U.S., and the number of U.S. work visas for technical resources. In 2008, for instance, there were 2,232 technical articles co-authored by U.S. and Israeli citizens, which places Israel squarely in the middle of the peer group. Separately, in 2009, 69 Israelis earned U.S. doctorates in Science and Engineering fields. While not directly included in the Index, some 660 Israelis were studying science and engineering in the U.S. at higher education institutions during the fall of 2009. The number of Israeli high-tech visa holders (H1-B visas) declined significantly over the last three years, dropping from nearly 6,000 to approximately 3,600, a 40% decrease. While significant, this decline is likely driven by economics, with similar follow-offs among many other nations from other countries in the peer set.

3.5. Private Sector and Industry MetricsU.S.–Israel collaboration within the private sector represents a core strength in the relationship, even when compared with other significant economies in the benchmarking study. As a baseline, private sector investment in R&D in the United States during 2008 represented 1.87% percent of GDP; whereas, in the same year in Israel, private sector investment in R&D represented 3.69% of GDP. These figures highlight the relatively higher focus of S&T investment within Israel. Exhibit 23 provides OECD data for this benchmark for the most recent years available.

Exhibit 21: Higher Education Sector Expenditure on Research and Development

Country 2010 2009 2008 2007

United States $51,163.00 $49,021.00

Israel $1,170.66 $1,114.73 $1,151.30 $1,067.61

Units: million current PPP $

Exhibit 22: U.S. H1-B Visas Received

Country Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 Fiscal Year 2007

Israel 3,671 3,442 4,445 5,727

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In terms of science and technology collaboration within industry, there are very notable ties within the U.S. and Israeli corporate and financial community supported by a high volume of international commerce, intra-corporate technology transfers, and sizeable flows of investment capital. As a direct measure of bi-national business, at the end of 2010, the U.S. and Israel exchanged approximately $11.4 billion in high-technology trade, $2.7 billion in U.S. exports to Israel, while importing $8.7 billion in goods. This represents a $5.9 billion U.S. deficit and Israeli surplus.

Additionally, it is widely understood that many U.S.-based multinational corporations have operations in Israel; and likewise, many large Israeli companies operate local affiliates in the United States. Unlike traditional imports and exports, the U.S. government tracks information on the internal movement of goods and services within these companies, providing some insight into how local offices are utilized. Exhibit 24 estimates annual cross-border trade in services and of services supplied to international markets through U.S. and Israel affiliates of multinational companies for 2008, the most recent year available.

As the exhibit above summarizes, U.S. and Israel corporations conducted $1.3 billion of internal corporate trade of high-tech goods and services, with entities transferring more than $800 million nire into the U.S. from Israel than vice-versa. These figures suggest that U.S. and Israeli multinationals use Israel as a source for high technology used by these companies in the United States.

The depth of U.S.–Israel financial ties is perhaps best illustrated by the large number of high technology companies listed on each other’s financial markets. As of September 1, 2011 , the Index estimates that 29 Israeli hi-tech companies are listed (or dual-listed) on the U.S.-based NYSE and NASDAQ exchanges. In comparison, there are more than 500 hi-tech U.S. companies listed on these exchanges, which highlights the sizeable portion of Israeli companies on U.S. stock exchanges. Interestingly, there are nearly 10 U.S. companies listed on the Israeli TASE exchange. The U.S.–Israel commercial ties combine financial cross-

Exhibit 23: Industry Financed Gross Domestic Expenditure on Research and Development

Country 2010 2009 2008 2007

United States 1.87% GDP 1.76% GDP

Israel 3.69% GDP 3.79% GDP

Exhibit 24: Activity of Multinational Companies

Latest Year Available

Hi-Tech Exports

Hi-Tech Imports

Total Hi-Tech Trade

U.S. Trade Balance

U.S. Imports from Israel 2009 $2,719 $9,005 $11,724 $6,286

Affiliate Transactions 2008 $220 $1,035 $1,255 $(815)

Note: US$ millions

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investment with broader intra-corporate and international trade that provides a proxy for the broad and deep role of the private sector in the U.S.–Israel technology relationship.

3.6. Research and Development MetricsWhile research and development occurs across the other categories of the Index, there are certain assets, processes, and outcomes related to the creation of new technology that suggest a review of specific R&D indicators. One common benchmark is the proportion of economic activity that focuses on R&D undertakings. As a percentage of GDP, Israel spends significantly more than the U.S. on R&D, 0.58% versus 0.36% in the United States, with only nominal changes from the recent past as presented in Exhibit 25 below.

These figures over time remain fairly consistent, although there are slight year-over-year variations.

One key area of R&D is the creation of patents, where there has been a fall off of in the number of U.S.–Israel co-patent applications – patent applications to the USPTO that include both a U.S. entity and an Israeli entity. While a similar decline was registered across the board, in 2007, the USPTO received 685 patent applications that included at least one Israeli inventor, a figure that declined in each subsequent year. In 2010, the USPTO received only 347 applications from teams including at least one Israeli inventor. In terms of global patent activity, in 2010, the USPTO issued a total of 1,819 patents in technology-related fields to Israeli entities; whereas, in 2009 (the most recent year available at time of writing), 2,615 patent applications were made to Israel by U.S. entities.

Exhibit 25: Total National R&D Expenditures as a Percentage of GDP

Country 2010 2009 2008 2007

United States 2.77% 2.61%

Israel 4.25% 4.28% 4.68% 4.76%

Exhibit 26: R&D Activity by Foreign Affiliates of Companies

R&D by U.S. Affiliates in Israel

R&D by Israel Affiliates in U.S.

Total R&D by U.S./Israel Affiliates

Total Balance of Affiliate R&D

2007 2007 2008 2008 2007 2008 2007 2008

$1,025 $1,060 $149 $201 $1,174 $1261 ($876) ($859)

Note: US$ millions

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3.7. ConclusionThe Index indicates that the United States and Israel have strong and consistent linkages in areas related to innovative activities. With the exception of one of the four thematic categories studied, the Israel–U.S. level of collaboration is stronger than the relationship between the U.S. and any of the other countries surveyed. The Index has identified a number of themes that characterize the U.S.–Israel relationship related to science and technology; and relate to international collaboration in innovation broadly.

The political and governmental relationship between the U.S. and Israel features a number of distinguishing facets that are highlighted in the Index.

�� A key element of the U.S.–Israel relationship is Israel’s position as the world’s second-largest recipient of U.S. foreign assistance in 2010 (Afghanistan was the first edging out Israel by less than US$5.0M). While U.S. foreign aid contributes to innovative activities within Israel, overall, this factor is reflective of the historic and strategic relationship between the two countries. As one of the metrics utilized in the Index, the impact is particularly favorable to Israel given that five of the comparator countries received zero assistance. Other U.S. strategic partners, such as Germany and South Korea, which have received sizeable assistance packages from the U.S. at previous points in time, do not do so currently. The large foreign assistance package between the U.S. and Israel may have a distorting effect on the relationship measured by the Index. However, this dynamic is an important facet of the overall relationship between the U.S. and Israel, and cannot be ignored.

�� While not directly included in this analysis, long-standing and deep military-to-military ties support (and justify) many of the civilian and commercial activities between the U.S. and Israel. This relationship is replicated to some extent with South Korea, but not with the other comparator countries. Israel’s position as a leader in security and defense technology further reinforces this aspect of the relationship and has knock-on implications across many areas of S&T collaboration.

�� The United States and Israel maintain a set of unique bilateral organizations focused on science and technology collaboration (BSF, BARD, BIRD) that is not mirrored by any other country compared in this study, with the exception of the South Korean Korea–U.S. Science Cooperation Center. These organizations and their objectives provide a unique lever to promote bi-national science and technology activity.

Overall, the level of U.S.–Israeli cooperation has been rather consistent over the past several years in most metrics examined, but there are some exceptions:

�� The number of Israelis entering the United States under H1-B visas has declined by almost 40% in the last three years. Declines are also observed for the other compared countries in the Index, with the exception of South Korea.

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�� Data measuring international collaboration in co-patent applications (applications featuring a U.S. first-listed inventor) filed with the U.S. Patent and Trademark Office shows notable declines for all countries evaluated in the Index. The reasons for the observed decline are unclear.

An inherent element of measuring linkages in innovation is accounting for the intangible factors that characterize a country’s approach to, and environment for, innovation. For example within the countries analyzed in this study, Israel, and to a lesser extent South Korea, are characterized by a state of being on a 'war footing' where defense considerations are a prominent driving factor in many government and societal decisions. The Index aims to take these intangible factors into account, but doing so poses challenges. Accordingly, the Index is intended to be a living document, with annual improvements and updates to address the challenges raised:

�� Comparing countries of different economic and population bases poses challenges in allowing for standardized comparison across indicators. Normalization of data by GDP or population helps to control for differences; however, in future years of the Index, the set of comparator countries will be under evaluation in order to ensure that the most appropriate comparisons are being drawn.

�� Likewise, the indicators used in the analysis will be evaluated. As new areas of emphasis arise in science and technology cooperation, it may be appropriate to develop specific indicators to match.

The Index is intended to be a strong information resource for the public, governments, and industry. The USISTF welcomes comments and ideas for improvements to increase the utility for decision makers.

Beyond the specific metrics tracked by the Index, U.S.–Israel cultural and societal ties transcend a large variety of non-scientific and technological elements. This underlying relationship and goodwill, while not evaluated in this study, permeates many of the countries’ science and technology interactions, and likely stimulates interaction between the two countries within all categories analyzed in the Index. Efforts to continue to support and develop the cultural relationship between the two countries will have positive impact on supporting the countries’ innovation-related linkages – a dynamic that also holds true for the other relationships examined in the Index.

The Israel 2028 Vision and Strategy lays out a set of goals and steps for moving Israel toward stronger socioeconomic footing. Leveraging innovation-related international collaboration is one vector toward achieving those goals. How policymakers, academic practitioners, and industry leaders utilize and develop the strong U.S.–Israel relationship described in the U.S.–Israel Innovation Index remains to be seen.

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