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Strategies for technology-based economic development

Success in the Middle East peace negotiations will lead to the creation of a new state: the state of Palestine. A new state with a traumatic history and without natural endowments requires much creativity in developing man-made comparative advantages. Because technology is behind manmade comparative advantage and will be decisive in determining any nation's competitive edge in the twentyfirst century, this report proposes strategies for economic development based on the prevailing international trends in technology change and commercialization. Rapid technological change, increased cost of innovation, international diffusion of technology, and increased competition are new realities that are now fostering more and more strategic alliances of mutual benefit to companies worldwide. A strategy whereby the public sector helps the private sector enter new technology-based businesses through international strategic alliances is presented through a case study of the United States-Israel Binational Industrial Research and Development Foundation (BIRD). BIRD-sponsored projects between US and Israeli companies are analyzed to understand the factors that influence the design and performance of strategic alliances. The case study clearly demonstrates an opportunity for a nation to increase its high value-added exports and to enhance a high-technology sector. It also demonstrates the significance of international support in the form of strategic alliances (BIRD-type) as opposed to direct foreign aid in promoting a nation's economic development, creating mechanisms for organizational learning, and facilitating binational relations that may transcend political and cultural barriers between nations. The implications of such a strategy on the Palestinian setting are presented through recommendations for the Palestinian Economic Development Group (EDG) -a