Does Jerusalem Have What It Takes to Build A Life Sciences Cluster?

11/27/12

Dark news was coming out of Israel on the morning of November 15. But in a talk that morning at MIT, Nir Barkat, mayor of Jerusalem, painted a bright picture of the city’s future. Barkat—whose name, incidentally, means “light”—argues that Jerusalem’s “brand name” has been building for over 3,000 years.

As a panelist at the talk, which was co-sponsored by the Broad Institute, the Research Lab on Electronics, and the Martin Trust Center for MIT Entrepreneurship, I was fascinated to hear Barkat’s vision, which is informed in part by his own experiences as a successful entrepreneur. The vision rests on investments in infrastructure but also on a balanced, dual-track approach to entrepreneurship, which he and others hope will lead to economic development and stability. The two pillars he laid out are (1) culture and tourism and (2) life sciences.

Mayor Barkat’s approach highlights the role of two types of entrepreneurship in economic development—small and medium size enterprises focusing on local markets, and innovation-driven enterprises that are part of globally tradable sectors of the economy. Culture and tourism provide tremendous opportunities for small business creation—hotels and restaurants provide jobs for many of those low-skilled workers with limited opportunities (but apparently there is a shortage of trained chefs in Jerusalem, so send in your applications!). It also provides a chance for enterprising young entrepreneurs to create novel tourist services, cultural experiences, and businesses driven by interest in art and culture. The other pillar of growth—the life sciences—has the potential to create high-wage jobs for PhD scientists, engineers, and those in the business community. But these innovation-driven companies also have a dramatic ripple effect, with over five jobs in related sectors such as hospitals and laboratory support created for every one job directly in an innovation-driven enterprise.

But one question Jerusalem must ask itself as it considers the health life science sector is whether it is really positioned for comparative advantage. Our experience studying the Cambridge/Boston “life science supercluster,” which is one of the few truly successful life science regions around the world, suggests that at least two ingredients are critical. To put this into an equation (something we like to do at MIT!), economic impact = (innovation capacity) * (entrepreneurial capacity).

Let me explain:

Innovation Capacity is the capacity to generate ideas that are new to the world and to develop them to scale (not simply in the laboratory). Israel, through massive R&D spending in the defense sector, computer science, and engineering, built up tremendous innovation capacity that supports its highly successful information and computer technology sector and its security technology entrepreneurs. On the other hand, public and private investments in life science R&D are necessarily smaller. While Israel has a world leading position in stem cells and impressive expertise in genomics, it is by no means (yet) at the scale of Boston, the Bay Area or even the UK, for that matter. There may be an opportunity to attract scientific talent back to the country in the biological sciences, but that is a major challenge.

Entrepreneurial Capacity is the capability to start and grow companies that can seek out and define opportunities and needs and then meet those needs. Again, no one doubts Israel’s entrepreneurial capacity (although people disagree on its origins—the book Start-Up Nation by Dan Senor and Saul Singer attributes it to chutzpah!). But at the moment this capacity is focused on an entrepreneurial community of leaders, investors, and others with deep expertise in information technology. While some people make the transition, few entrepreneurs move seamlessly from information tech to biotech (and those that do are often frustrated with the slow pace of progress and high costs of building a business in the life sciences). So, in considering a move into life sciences, the mayor should develop a plan to attract a cohort of more experienced entrepreneurs—expatriates and others—back to the country.

Substantial economic impact comes not from Entrepreneurial Capacity or Innovation Capacity alone. Even countries with extraordinary track records in science and innovation, such as Scotland or Switzerland, have not always been able to translate that record into rapid economic growth, often for lack of sufficient scale of entrepreneurs and investors. Likewise, major cities like New York have recognized that while their entrepreneurial capacity might be vibrant and growing, they need to make investments in innovation capacity. Indeed, the mayor of New York has turned to a Cornell-Technion (in Israel) alliance to help solve that capacity problem, with a plan to train many computer scientists and data wizards every year at a new technology campus on Roosevelt Island.

Even places where both capacities exist can fail if they are not linked—the two capacities are multipliers, not additive. Singapore has made massive investments in R&D and has a strong entrepreneurial community, but the two are not as linked as they need to be to have real impact. Likewise, London is working to determine how to connect its burgeoning entrepreneurial community to its innovators—engineers, computer scientists, and other creative “types”—in an attempt to make London a special place for digital media startups.

In Israel’s information and computer technology cluster, the linkages that tie entrepreneurs to the deep community of technical expertise is particular. Military service, as Mayor Barkat noted, throws young people together in a formative experience that not only links them across disciplines but does so in a way that builds team skills and an appreciation for the need for different skills in solving complex problems. At the same time, these future entrepreneurs and innovators also learn about the critical needs of the military and so become sophisticated in understanding “customer needs.”

Unfortunately, the military is less likely to provide the linkages that will weave the life science community together. Medical researchers and life scientists are less integrated into the entrepreneurial community; universities are not always as effective as they should at moving life science technologies across boundaries. Indeed, I vividly recall a presentation I made to the MIT Enterprise Forum in Tel Aviv about different models of bringing entrepreneurs and innovators together and the role of the technology transfer office. At the end of my remarks, a successful entrepreneur was deeply critical of the approach taken by Israel’s universities, arguing that they overreach in their licensing deal terms in a way that limits the incentives for innovators and entrepreneurs to work together. Solving this problem will be essential to the Mayor’s project.

In desiring a life science cluster, Jerusalem is not alone: At least 48 of the 50 states in America have a plan for one. So do Scotland, Andalucia, Australia, South Africa, and many other regions and cities around the world. Is there something Mayor Barkat can do to make success more likely? One idea comes to mind: What if the city can build on its existing capacities—entrepreneurial and innovation—in information technology and the existing linkages in that cluster and move to an adjacent opportunity such as health IT? Consumer health startups leverage expertise in hardware, big data and software as well as biology and medicine. Entrepreneurs and investors from information technology are migrating into health IT. Entrepreneurs without deep links to the pharma sector can play and build capacity at a younger age. And the capital requirements are more limited. Israel has a tremendous health care infrastructure. Building and linking innovation and entrepreneurial capacity to leverage it for growth could be transformative.

Mayor Barkat’s approach makes sense. It is in many ways consistent with the message we teach in through the Regional Entrepreneurial Acceleration Program at MIT, which emphasizes the multiplier effect of linking entrepreneurial capacity with innovation capacity in key areas of potential strength. Moving beyond a traditional view of life sciences to emphasize health IT could make it even stronger. At this time his vision is a welcome one and is surely an experiment worth running, since increasing prosperity and jobs is one of the surest ways out of the conflict in the Middle East today.

Fiona Murray is the Alvin J. Siteman (1948) Professor Entrepreneurship at MIT’s Sloan School of Management, Associate Dean of Innovation and Co-Director of MIT’s Innovation Initiative. She can be reached at fmurray@mit.edu. Follow @

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  • Michael K

    Interesting article, although you probably should factor some of the political issues into the equation. Many of the entriprenuers in the area are Arab, but the opportunities for such people, whether Muslim or Christian, are very limited. There is an inability to access capital, the inability to rent space or to expand existing areas. Coupled with the settlement activity and the 45 year occupation, that has led many organizations to begin calling for a South Africa-style boycott and divestment of businesses from the country, and investors and partners may be very hesitant to participate.