Over 40 Big European Corporations Operate Innovation Outposts In Israel

Over 40 large Europeans corporations from nine countries operate innovation outposts in Israel, according to a new report published jointly on Monday by three global organizations tracking tech and innovation worldwide.

The report, titled “European Corporate Innovation Outposts in Israel – The Who’s Who,” shows that nearly half of these European outposts were set up in Israel over the past three years, growing at a pace of about eight per year.

The 24-page report maps the activities of 41 European corporations who set up outposts in Israel, a majority in Tel Aviv, “tracking their presence and observing how they increase, modify and diversify their activity over time.” The document was put together by Startup Europe Comes To Israel (SEC2IL), an organization that brings together corporates, investors, and entrepreneurs from Europe and the EU, Mind the Bridge, a global organization that provides innovation advisory services for corporates and startups, and Startup Europe Partnership (SEP), a pan-European open innovation platform established by the European Commission. The group presented the report on Monday at the Tel Aviv Stock Exchange to launch the SEP Scaleup Summit.

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Companies with a presence in Israel include those who set up shop decades ago such as German pharmaceutical giant Merck (launched in the 1970s, German software giant SAP, and communications multinational Deutsche Telekom (each launched in the late 1990s). A majority of the outposts were set up by corporations in the automotive, engineering and electronics, and biotech fields, according to the report. These include Volkswagen, Skoda, Volvo, Porsche, and Daimler in the auto sector, Bosch, Nokia, and Eriksoon in electronics, and Lonza, Bayer, and Novartis in pharmaceuticals and biotech.

A majority of the corporations – 13 out of 41 – are from Germany, followed by France with 10, the UK with seven, and Switzerland with four, according to the report. Sweden, Netherlands operate two corporate outposts in Israel, and Italy, Finland and the Czech Republic each have one such center in the country,

The report notes that additional companies from across the continent will set up a presence in Israel as “physical proximity to the key hubs of innovation is becoming an increased necessity to remain competitive.”

“European economic presence in Israel is rapidly growing, a trend that has markedly accelerated in the past three years,” said EU Ambassador to Israel Emanuele Giaufret, in a statement accompanying the report. “This is in addition to already very close economic ties and the impressive trade flows between our countries whereby the EU is by far Israel’s largest trading partner covering around 34 percent of its export and 40 percent of its import.”

The innovation outposts themselves vary and the survey notes four key types: Corporate Innovation Antennas, which employ small teams of up to 10 people tracking trends and engaging with Israeli startups on an individual level; Corporate Innovation Lab which act as incubators and “lean” R&D centers; actual R&D centers which employ at least 50 people and have dedicated missions to draw on both startup technology, as well as local talent; and Corporate Venture Capital Outposts (CVC), which are venture arms set up by the corporate.

According to the report, 28 of the 41 corporations operate R&D centers in Israel, 11 have a Corporate Innovation Lab, seven have CVC offices, and three operation Corporate Innovation Antennas. Six out of the 41 corporations operate multiple outposts in Israel, often including a Corporate Innovation Lab in or a CVC facility in addition to an R&D Center.

“The concentration of R&D centers in Israel is a testament to the strength of the Israeli workforce and skills which make the country so attractive for corporates looking for a non-European R&D Center,” said Mind the Bridge CEO Marco Marinucci in the statement.

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The report also devotes a short section to the comparison between European activity in Silicon Valley and in Israel, noting that the former is currently a more frequent destination for European scaleups with 60 outposts. However, Israel is host to more R&D and innovation outposts while Silicon Valley has more antennas, labs and investor posts, suggesting a more “transactional” context (investments and M&As) versus a more research/co-development approach in Israel, according to the report.

Alberto Onetti, chairman of Mind the Bridge, said “European companies from across industries have been operating in Israel for decades, mostly through an R&D approach. During the last three years, we have seen a strong shift towards a leaner approach and the use of open innovation mechanisms.

“More companies are increasingly experimenting with different partnership models, making innovation costs variable and on-demand. This trend is similar to what we have been observing since 2010 in Silicon Valley. European presence in Israel is still not at the same level as that of Silicon Valley. However, it’s definitively on the rise.” he added.