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Linkage of new Israeli high-tech companies to the military and defence system28/09/2005. Source: Israel Venture Capital Journal. Dr Yoel Raban, Dr Miri Lerner and Dr Benson Honig
 In this Israel Venture Capital Journal article, Dr Yoel Raban, Dr Miri Lerner and Dr Benson Honig investigate the linkage between new Israeli high-tech companies and the military and defence system. The study examines the impact of social capital, signalling, and learning spillovers on resource acquisition in terms of investments and the financial performance of companies with and without linkage.
Social capital is the process and condition of social networking among people and organizations. Social capital amassed by the founders and teams of high-tech companies is predicted to facilitate economic activity. By signaling, we refer to special characteristics of entrepreneurs that may impact the decision to invest in their venture. The idea of learning spillovers refers to the knowledge accumulated while working in a certain environment, which might have a positive influence on productivity and creativity in the future.
Social capital, signaling and learning spillovers are examined as they impact individual and organizational resource acquisition and performance of 200 new Israeli high-tech companies. From an entrepreneurial perspective, social capital provides networks that facilitate the discovery of opportunities as well as the identification, collection, and allocation of scarce resources. This study contributes to the existing literature of entrepreneurship by suggesting the relevance of knowledge spillovers, signaling theory and social capital to the context of the interface between defense and civilian spheres.
Breznitz (2002) argues that the Israeli military should be viewed not only as mechanism for producing highly trained professionals in industries such as software and as a source of new technologies via various spin-offs, but also as one of the main nodes in the national innovation system that diffuses information, spurs collective learning, and creates standards for industry as a whole. Such spillover effect was recently acknowledged by Dr. Dalia Megiddo (see IVC, March 2005 ).
She claimed that "Heavy government investment in defense technology created, as a by-product, a cadre of experienced, well-educated engineers who benefited from previous multi-billion investment in Israeli defense, and that many of the achievements of the medical technology ventures in Israel can be related to their linkages with the military defense system."
Our research sample consisted of the founding members of 200 young high-tech firms who had completed a detailed questionnaire. The research population was obtained from a list of all firms in technological industries established in Israel between 1990 and 1998. Data were collected by the Interdisciplinary Center for Technological Analysis and Forecasting at Tel Aviv University at the end of 1998.
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This article first appeared in the Israel Venture Capital & Private Equity Journal. IVC Research Center publishes the Israel Venture Capital & Private Equity Journal (IVCJ), a quarterly review of trends and developments in the Israeli-related venture capital industry. IVCJ, distributed worldwide, is dedicated to provide wide-range coverage of Israel's venture capital industry. For more information please visit www.ivc-online.com
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