The Massachusetts-Israel Economic Impact Study
The business relationship between Massachusetts and Israel has a long history, with Israeli-founded companies finding a welcoming home in the state. This partnership has been beneficial for both parties, leveraging Massachusetts' robust tech and life sciences ecosystem and Israel's innovative technology sector. Israeli-founded companies started establishing a presence in Massachusetts as far back as the 1960s. Some notable examples from that era include Scitex, Elcint Elron, Fibronix, Optrotech, Orbot, and Indigo.
These companies recognized the appeal of Massachusetts as a hub for technology and life sciences. The state offered a high-quality labor force, access to capital, diverse industry sectors, leading companies, renowned academic institutions, and a strategic gateway to the North American market.
Over the years, the number of Israeli-founded companies in Massachusetts has continued to grow. By 2023, it is estimated that over three hundred such companies operating in the state, indicating the enduring strength of this business relationship.
Three independent studies conducted, over the years, by Stax Inc. have sought to evaluate the impact of Israeli-founded companies on the Massachusetts economy. These studies assessed factors such as job creation, revenue generation, and contributions to the state's innovation ecosystem. The latest study was published in June 2016 and its findings remain relevant today.
The Stax, Inc. research on which this whitepaper is based measures the economic impact of company founders. The methodology of this type of analysis was first performed and later updated at MIT, and at Stanford University, Technion (Israel), and Tsinghua (China).
Israeli-founded businesses in Massachusetts generated $9.3 billion in direct revenues. This figure represents the sales originating from the businesses' Massachusetts location(s).
Additionally, the study considered the indirect economic impact of these businesses. Using standard U.S. Bureau of Economic Analysis multipliers, it was found that Israeli-founded businesses contributed significantly to the state's overall GDP. Specifically, they generated an additional $8.8 billion in economic activity. This indirect impact is attributed to the businesses' expenditures, such as the purchase of office space, professional services, and other goods and services.
The total of $18.1 billion contribution represents 3.8% of the state's overall GDP, indicating the substantial role that Israeli-founded businesses play in the Massachusetts economy.
Israeli-founded businesses in the state have created over 9,000 direct jobs. These jobs contribute directly to the state's workforce and are likely to play a significant role in strengthening the innovation economy.
In addition to direct job creation, the study considered the indirect economic impact of these businesses. Using standard U.S. Bureau of Economic Analysis multipliers, it was determined that Israeli-founded businesses generated an additional 18,100 indirect jobs.
The indirect jobs are a result of the economic ripple effect from the businesses' expenditures. This includes their spending on items such as office space, professional services, and other goods and services.
The combined impact of direct and indirect job creation from Israeli-founded businesses in Massachusetts amounts to a total of 27,100 jobs.
In the 2016 study, 216 Israeli-founded businesses were identified in Massachusetts. As of 2023, it is estimated that the number of such companies has grown to over 300. The companies span across the Information Technology (IT) and life sciences sectors. These sectors, illustrated in more detail in the figure to the left, are identified as major industries of growth in both Israel and Massachusetts.
IT businesses take the lead in terms of revenue, jobs, and capital. This dominance is attributed to sustained growth over the last few decades, particularly in areas related to data, networking, and software.
The state of Massachusetts is recognized as the world's leading life sciences cluster. In recent years, life sciences have shown significant growth both in Israel and Massachusetts. More and more Israeli researchers and companies are tapping into the Boston hub as a gateway to the U.S. and global markets.
Massachusetts, and particularly Boston, is a highly attractive location for entrepreneurs, and there are several reasons why it stands out, especially for Israeli founders. Massachusetts, with Boston at its center, boasts a robust and dynamic innovation ecosystem which is characterized by a concentration of cutting-edge industries, research institutions, and a supportive entrepreneurial culture.
It offers special advantages and connections that are tailored to meet the needs and interests of Israeli founders. These advantages are often superior to what other geographies can offer, creating a conducive environment for Israeli entrepreneurs.
This comparison highlights key strengths, resources, and opportunities unique to Boston vs NYC and vs Silicon Valley.