Israel supports SME technology adoption through a combination of innovation grants and subsidised business advisory services. The Israel Innovation Authority (IIA) delivers a tiered set of R&D programmes, including Magnet for industry-academia consortia, MOFET (technology development centres) for manufacturing firms, and the R&D Preparatory Incentive Programme for first-time applicants with limited R&D experience, often SMEs in traditional sectors. In parallel, the Small and Medium Business Agency (SMBA) operates a nationwide network of MAOF (business support centres) centres providing subsidised consultancy, diagnostic support and training, including on digital tools and AI. Together, these instruments illustrate the value of combining targeted innovation support for firms at different levels of technological capability with standardised, publicly overseen advisory services delivered through private intermediaries to broaden SME access to innovation and digital upgrading.
Israel’s technology adoption programmes
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Introduction
In Israel, the primary agency promoting STI instruments that foster academia-industry partnerships is the Israel Innovation Authority (IIA), which is responsible for enhancing the infrastructure for R&D collaboration at both national and international levels. The IIA plays a central role in fostering the Israeli innovation ecosystem by promoting co-operation across sectors and assisting in the development and commercialisation of new technologies. Among others, it runs the following SME-relevant programmes:
Magnet Programme: The flagship instrument of IIA’s R&D instruments is the MAGNET Programme, which offers grants to support collaborative R&D between groups of companies, including SMEs, and research institutions.
“MOFET” Programme (R&D in the manufacturing industry): This programme offers individual grants to (traditional) manufacturing companies to advance and adopt technological innovation through R&D initiatives focused on developing innovative products and production processes.
The R&D Preparatory Incentive Programme complements the MOFET Programme, supporting industrial companies with no prior R&D experience – often SMEs – with consulting services and grants.
In the area of business support services, Israel assists SMEs through the Small and Medium Business Agency (SMBA) and its nationwide network of MAOF Centres providing a variety of tools, including targeted consulting services and access to funding to assist SMEs and entrepreneurs.
Delivery arrangements
Established in 2016, the Israel Innovation Authority (IIA) is an independent publicly funded entity responsible for Israel’s innovation policy. It oversees a broad portfolio of R&D and innovation programmes, such as technology incubators focused on high-tech start-ups, but also initiatives that support traditional SMEs through applied R&D and technology adoption. The following programmes are particularly relevant for SME technology adoption:
Magnet programme: The Magnet programme is run by IIA’s Innovation Infrastructures Division. The Magnet consortia, consisting of companies and research institutions, collaborate to develop generic, pre-competitive technologies in strategic areas where Israel holds or aims to establish a competitive advantage, incentivised by grant support. The programme also supports the development of enabling infrastructure technologies that underpin innovation across sectors. While not specifically targeting SMEs, SMEs are involved in the consortia projects. Depending on the type of consortium, companies receive up to 66% of the approved costs (industry consortium) or a tailored grant along with the right to use the IP developed within the project (knowledge-building consortium). Under the umbrella of the Magnet programme, smaller initiatives such as “Magneton” – which supports individual industrial companies collaborating with research institutes to adapt academic knowledge for industrial use – and “Knowledge Import” – which promotes co-operation with foreign research institutes, offer targeted R&D support, including for SMEs.
“MOFET” Programme (R&D in the manufacturing industry): The primary programme operated by the IIA’s Advanced Manufacturing Division aims to incentivise manufacturing companies to advance and adopt technological innovation through R&D initiatives focused on developing innovative products and production processes. Manufacturing companies from both traditional and high-tech manufacturing sectors can benefit from grants covering 30% to 50% of R&D expenses, as well as grants of up to ILS 500 000 for unique R&D expenses such as the development of molds or unique production machinery to be incorporated into production process. Preferential conditions are granted to companies in the periphery of the country.
The R&D Preparatory Incentive Programme complements the MOFET Programme, targeting industrial companies with no prior R&D experience, which are often SMEs. The programme is specifically designed for manufacturing companies in low or mid-low R&D-intensive sectors (food, beverages, textiles, leather, wood, paper, oil products, rubber, plastics, metals, building materials). In 2023, 23 companies that completed the preparatory programme advanced to the MOFET Programme. The programme offers professional consultation to help companies identify technological gaps in their current capabilities. Support is provided across four tracks: product development, feasibility assessment, resolving production flaws, and improving production processes. Manufacturing companies can benefit from grants of 66% of the approved budget (maximum budget ILS 75 000) and preferential conditions for companies in development regions (grants of 75% of the approved budget).
The R&D Preparatory Incentive Programme aims to enable participating companies without prior experience in R&D to get a clear definition and tools on the innovation they are working for. Evaluation data from 2019 indicate that 90 companies developed R&D programmes with guidance from a technology expert, supported by a total of ILS 5.7 million in funding that year. Notably, 60% of the 213 applications submitted to this programme and the MOFET Programme were from first-time applicants. Of those supported through the R&D Preparatory Programme, 24 companies successfully formulated comprehensive and innovative R&D plans, which were subsequently submitted to the MOFET Programme.
Company example: Growee – From prototype to commercialisation through the R&D Preparatory Incentive Programme
Growee is a strong example of product and process development supported by the R&D Preparatory Incentive Programme. The company was founded in response to emerging trends in urban agriculture, particularly hydroponics, a method of growing plants in water without soil. After identifying market potential, the founder demonstrated the technical feasibility and demand for his solution and received initial funding. The company developed an innovative smart growing system that combines a physical device with a dedicated mobile application that simplifies the complex process of hydroponic cultivation for everyday users. Through support from the R&D Preparatory Incentive Programme, Growee advanced from early-stage development (prototype) to large scale industrial production and commercialisation.
Beyond R&D support, business support services that can help SMEs adopt technologies are offered by the Small and Medium Business Agency (SMBA) which operates under the Ministry of Economy, represents the SME sector in Israel and oversees a nationwide network of MAOF centres. These centres are one-stop shops for business development services and provide tailored assistance to SMEs including one-on-one business consulting – from initial needs assessment and professional diagnosis to the development of a personalised support plan. The centres also offer targeted training and courses on the use AI tools, digital marketing, and social media. In its role as operator of the State Guarantee Loan Fund the agency also provides funding assistance to SMEs. Twenty MAOF-Tech centres in peripheral regions of Israel specifically support SME technology adoption.1
A distinctive feature of the MAOF Centres is that they are operated by private-sector intermediaries who are selected through competitive tenders and managed regionally under service agreements. Following limited government oversight, inconsistent service quality and a critical review by the Auditor General, the SMBA replaced the MATI centres with the new system of MAOF centres in 2014. The MAOF structure was therefore introduced to establish national quality standards and ensure more consistent, standardised services for entrepreneurs and SMEs.
Once a company is selected for support, the subsidised consultancy programme allows it to receive tailored advice from a private consultant, with the SMBA covering part of the fee. The process begins with an initial needs assessment carried out by the programme operator. The MAOF centres work with the SME to define consultancy goals and recommend three accredited consultants. The SME then selects one of these consultants to proceed with the support. Figure 1 below illustrates the subsidy support structure. The SME receives a consultation package (e.g. 100 consultation hours) delivered by an accredited private consultant. The SME co-finances the service by paying a fee (ILS 10 000), while SMBA pays the remaining share of the consulting cost directly to the consultant (ILS 15 000). In parallel, SMBA pays a separate management fee to the programme operator (Maof) (ILS 4 000) to cover case management functions such as the initial needs diagnosis, setting the consultancy objectives with the SME, and matching the SME with accredited consultants. Finally, SME satisfaction feedback is collected through surveys and can be used to incentivise operators.
Source: OECD (2024). Summary of Proceedings, Second meeting of the International SME and Entrepreneurship Policy Evaluation Discussion Network, Evaluation of Israel’s SME consultancy programme , https://www.oecd.org/content/dam/oecd/en/networks/sme-and-entrepreneurship-policy-evaluation-discussion-network/second-meeting-documents/Meeting-2-Summary-Note-International-SME-and-Entrepreneurship-Policy-Evaluation-Discussion-Network.pdf
Budget & Outreach
In 2021, the private sector conducted 91% of R&D, with the government funding only 9% of national expenditure, the lowest level of state funding across OECD countries. Notably, more than 50% of private R&D funding in Israel comes from foreign investors. Nevertheless, the public sector continues to play a pivotal role in guiding SME technology adoption through the aforementioned programmes, which fall under the typology of R&D and innovation grants (rather than tax breaks). The largest programme, Magnet, has an annual budget allocation of around ILS 200 million (new Israeli shekel, which is equivalent to around EUR 50 million) across sub-programmes. The majority of funding goes to the Magnet consortiums which provided 111 grants of ILS 106 million (around ILS 1 million average grant size per consortium).2 The table below presents the distribution of direct public R&D funding across the different selected IIA activities:
Source : Israel Innovation Authority. (2024.). Appendices. In The State of High‑Tech 2024. https://innovationisrael.org.il/en/report/appendices/ .
In 2023, the annual budget of the Small and Medium Business Agency (SMBA) stood at ILS 78.5 million. The most recent available budget figure for the MAOF centres dates back to 2016, amounting to ILS 65 million. An evaluation of a previous programme in 2013 indicated that the SMBA subsidised 3 000 consultancy projects, totalling approximately 220 000 hours of support. The SMBA aims to serve around 12 000 entrepreneurs and SME owners annually.3
Independent external evaluation
A detailed recent report, an independent external evaluation by the Samuel Neaman Institute4, an independent national policy research institute, systematically mapped and evaluated existing government tools for academic-industry collaboration in Isreal with a special emphasis on the Magnet Consortia Programme. To this end, the institute analysed a sample of 130 companies and 17 academic institutions involved in 20 Magnet consortium projects between 2006 and 2020. Textual data from the survey’s five open-ended questions were analysed and grouped into categories representing intensity levels from 1 (low) to 5 (high). This was done using a taxonomy process that organised individual responses into clusters based on content similarity. Based on this methodology, the following results were found:
In terms of indirect benefits, “technology application to other fields and products” was the category that got the highest value across all different types of company participants, “economic utility” or “strengthening co-operation to other research ventures”, which were both rated at a medium intensity (level 3), or “strengthening the ecosystems” (rated at level 1).
Following self-reported survey data 42% of Magnet participants from industry believed that their collaboration with academia had contributed to a large or very large extent to the establishment of the company’s intellectual property.
Based on Magnet Consortia reports and personal interviews several factors hindering co-operation and technology transfer between companies were reported, notably “reluctance to disclose knowledge” and “protection of IP and business competition” (level 5). In addition, the dominance of larger companies within the consortia was identified as a limiting factor, often coming at the expense of smaller startups. While much of the R&D is carried out by small firms and academia, the resulting knowledge tends to benefit larger companies, which are less likely to share their intellectual property. To address this imbalance, the report recommended increasing financial support and subsidies for smaller companies.
The following main lessons can be drawn from the description of this programme:
Israel’s innovation ecosystem is marked by a high level of private R&D investment and the lowest share of public R&D spending as a percentage of total R&D among OECD countries. Against this backdrop, the Magnet programme stands as a strong example of industry-driven R&D grant support that is inclusive of SMEs and promotes knowledge transfer from academia to industry. To reach greater SME engagement, increasing awareness of support measures and providing preferential access and targeted financial incentives could be considered.
For SMEs in lower-tech or traditional sectors, the R&D Preparatory Incentive Programme offers an example of a successful entry point into technology development and adoption for SMEs. A key success factor of the R&D Preparatory Incentive Programme is the integration of individual consulting services to identify technology gaps in SMEs with generous grant support (up to 66% of costs) for R&D projects which can later be scaled up in more advanced programmes (MOFET programme).The programme is currently small-scale, but based on proven success, there is nothing preventing the scale-up other than existing demand for the support services. .
The network of MAOF centres operated by private-sector intermediaries under SMBA oversight, offers a replicable model for subsidised consultancy support for business development services. Since the 2013 reform, delivery has been streamlined through a competitive tendering process.
In terms of support for (digital) technology adoption, the MAOF centres deliver a range of services to SMEs at different stages of digital maturity, encompassing tailored consulting, digital skills development, and targeted training on subjects such as the use of AI and digital marketing. Collecting more robust data on participation of SMEs and impacts on technology adoption would help deepen policy learnings.
Israel’s mix of instruments shows how a single national innovation body can offer tiered pathways into technology adoption for different types of firms. The Israel Innovation Authority (IIA) combines pre-competitive, consortium-based R&D (Magnet) with firm-level grants for manufacturing companies (MOFET) and a dedicated on-ramp for first-time, lower-R&D-intensity SMEs (the R&D Preparatory Incentive Programme) that blends consulting with grant support and can feed successful entrants into more advanced schemes. This sequencing, advisory plus initial support, followed by progression into larger R&D, speaks to challenges faced by SMEs outside high-tech sectors.
Complementing the R&D grants, the SMBA’s MAOF centres provide a one-stop, subsidised consultancy offer delivered by private intermediaries selected via competitive tenders under public oversight. The model standardises service quality, begins with a needs assessment and a shortlist of accredited consultants, and adds targeted training (including on AI tools and digital marketing), with MAOF-Tech centres in peripheral regions to widen access. This pairing of national grant instruments and regionally delivered, standardised advisory services is pertinent to UK aims to reach SMEs at varied levels of digital maturity.
Evaluation findings point to practical design cautions. In consortia programmes, IP concerns and large-firm dominance can limit spillovers to smaller firms; the case notes options such as preferential access and targeted incentives to bolster SME participation. It also highlights the value of tracking who participates and with what effects, the case calls for more robust data on SME take-up and adoption outcomes in the MAOF consultancy stream, so that support can be refined over time.
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← 1. Bianchini, M. and I. Kwon (2020), “Blockchain for SMEs and entrepreneurs in Israel”, OECD SME and Entrepreneurship Papers, No. 18, OECD Publishing, Paris, https://doi.org/10.1787/b6d380ed-en.
← 2. Israel Innovation Authority. (2024.). Appendices. In The State of High‑Tech 2024. https://innovationisrael.org.il/en/report/appendices/ .
← 3. A breakdown of clients by sectors, or data on the uptake of technology-related services following MAOF support was not available.
← 4. Leck, E., Gilad, V., Getz, D., Tziperfal, S., & Klein, R. (2022). Evaluation of R&D instruments for fostering academia-industry collaboration: The case of the MAGNET consortia. Samuel Neaman Institute. https://www.neaman.org.il/wp-content/uploads/2024/02/Report_MAGNET-Consortia-Program-Evaluation-Final-March-27.pdf .
