Table of Contents

Handbook of Research on Innovation and Clusters

Handbook of Research on Innovation and Clusters

Cases and Policies

Handbooks of Research on Clusters series

Edited by Charlie Karlsson

The role of innovations and clusters has increasingly dominated local and regional development policies in recent decades. This authoritative and accessible Handbook considers important aspects of high-tech clusters, analyses insightful cluster case studies, and provides a number of recommendations for cluster policies.

Chapter 7: Venture Capital Emergence and Startup-Intensive High-Tech Cluster Development: Evidence from Israel

Gil Avnimelech, Dafna Schwartz and Morris Teubal

Subjects: business and management, organisational innovation, economics and finance, economics of innovation, regional economics, innovation and technology, economics of innovation, organisational innovation, urban and regional studies, clusters, regional economics


Gil Avnimelech, Dafna Schwartz and Morris Teubal 1 Introduction and objectives This chapter deals with the evolution of the Israeli startup-intensive high-tech cluster of the 1990s and its relationship with the Venture Capital (VC) industry. Startup-intensive high-tech clusters are high-tech clusters with a significant startup segment such as the clusters in Silicon Valley, Cambridge and Israel. The link with VC industry results from the fact that they have been an important motivator for the successful emergence and development of such clusters, certainly in Israel (Avnimelech and Teubal, 2004a, 2006a) and possibly in the Silicon Valley case (Florida and Kenney, 1988). The chapter will present a life-cycle perspective of the evolution of the VC industry and high-tech cluster in Israel. We suggest that this case, despite its unique characteristics, has significant policy implications for other regions. In this chapter we consider VC as an industry, which evolves over time while coevolving with the high-tech cluster. The VC industry includes formal and non-formal VC agents such as VC funds, investment companies, incubators and business angels. VC agents consist of ‘independently managed dedicated pools of capital that focus on equity investments in privately held, high growth companies’ (Gompers and Lerner, 1999, p. 349). This definition allows for two variants, a narrow and a broad one. The narrow definition of VC companies includes those organizations with a ‘dominant’ orientation to the early stage financing of high-tech startups. This is the dominant category when characterizing Israel’s VC industry (Avnimelech and Teubal,...

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