Some Important Weaknesses Are Still Threatening the Israeli Model

Despite of the clear strengths that have been developed by the Israeli system, some weaknesses remain .

First is the country's dependency on the international high-tech economy. Drastic economic changes, like those that affected the Nasdaq in 2000 and 2001, have hit Israel particularly hard. In addition, the small size of most of these companies makes it particularly difficult for them to weather strong economical and financial pressures. In past years , many Israeli high-tech companies had no other choice but to be acquired by bigger ones, notably from the United States.

The country's geographical isolation and small domestic market make it totally dependent on its export market and company partners . The direct consequence of this is that Israeli companies are particularly sensitive to foreign economic or political movements, or to the financial situation of a major foreign client or partner.