Dany Bahar in Brookings:
Israel has the highest budget for R&D as a proportion of its gross domestic product in the world, as can be seen in the figure below.
Israel invests about 4.5 percent of its GDP in R&D. This number goes far beyond the OECD 2.2 percent average, and much more than many other countries at the same level of income.More here
This is not a coincidence. It is linked to the fact that Israeli governments have been pursuing policies to foster innovation for decades now. The Office of the Chief Scientist (OCS) of the Ministry of Economy, an independent authority managed by professionals (and not politicians) are in charge of creating public policies to support the private sector by fixing important market failures that could hinder innovation. If one had to pick the most important role the OCS has, it would be risk- sharing. By collaborating with the private sector to inject “risk capital” into the economy, the government shares the risk that otherwise the private sector alone would be unwilling to take. Moreover, the OCS is very careful to create programs that avoid crowding out private investment, always asking the question: what is the market failure we are trying to solve?