Israel is a small country with scant natural resources. The country’s founding fathers, led by Chaim Weizman, Israel's first president, therefore focused on human intelligence and science as key factors. The Daniel-Sieff Research Institute, the Hebrew University of Jerusalem, the Technion in Haifa, and other smaller facilities existed before the founding of Israel in 1948. The state was thus able to build on these foundations.

Currently, Israel has eight officially recognised universities, among them the Open University of Israel (distance learning), and the Weizman Institute of Science (founded in 1934 as Daniel Sieff Institute). There is also a network of public research institutions, among them the Volcani Center for agricultural research and other centers for geophysics, oceanography, geology (Earth Science Research Administration [ESRA]), and biology (Israel Institute for Biological Research [IIBR]), as well as the Israeli Space Agency. Two ministries share responsibility for science: the Ministry of Science and Technology (MOST) and the Ministry of Economy and Industry (MOEI).

The Israel Innovation Authority (IIA) , an independent publicly funded agency, was established in 2016. It replaces the Office of the Chief Scientist (OCS) of the MOEI, which coordinated and implemented government policies to promote industry-related research, development, innovation and entrepreneurship. The IIA was thus created to provide a variety of practical tools and funding platforms aimed at effectively addressing the dynamic and changing needs of the local and international innovation ecosystems. The agency has an annual budget of around EUR 450 million. The Israel Science Foundation (ISF) supports excellence in basic research across all fields of knowledge primarily at universities with around EUR 160 million per year.

The scientific activity dynamic has increased in recent years, resulting in the accumulation of Nobel Prizes. In recent years, eight Israeli researchers have been awarded a Nobel Prize: Daniel Kahnemann (Economy 2002), Aaron Ciechanover and Avram Hershko (Chemistry 2004), Robert Aumann (Economy 2005), Ada E. Yonath (Chemistry 2009), Dan Shechtman (Chemistry 2011), and Michael Levitt and Arieh Warshel (Chemistry 2013).

Behind all of this lie enormous societal endeavors: According to the OECD 2018, Israel's investment in research and development was, againthe highest worldwide totaling 4.94% of GDP. Only civil research is taken into account. According to the Global Competitiveness Report 2019, Israel continues to be one of the most competitive economies again finishing 20th. For the innovation indicators, the country ranks 15th. The strength of Israel's innovation environment allows innovations to be implemented in enterprises exceptionally quickly.

There are relatively many high-tech start-ups in Israel. About 3,000, mostly smaller, research and development-intensive businesses are active in the country, of which more than one-third are IT companies. Communications technology, biotechnology, medical technology, and solar energy are the main industrial research and development activity areas. Extensive government funding, specifically by the Ministry of Economy, is the decisive factor in Israeli high-tech companies’ success.

The Israeli Centers for Research Excellence (I-CORE) is an initiative, which gradually establishes leading research centers specializing in a range of disciplines. The Centers of Excellence and the programme's vision are aimed at fundamentally strengthening the long term positioning of Israel's academic research and its stature among leading researchers in Israel and abroad.

Israel has been associated to the EU's research and innovation framework programmes since 1996. The agreement on Israel's participation in Horizon 2020 was signed on 8 June 2014. Israel is member of the intergovernmental network EUREKA and cooperating member of the European Cooperation in Science and Technology (COST), a funding organisation for the creation of research networks. Within the IIA, the Israel-Europe Research and Innovation Directorate (ISERD) is responsible for cooperation in the European Research Area.

The large share of private risk capital is also an important factor. Compared to the EU member states, Israel occupies the first position in respect of mobilising venture capital.

Its continuous high foreign investment, most of which still comes from the USA, reflects Israel’s attractiveness as an investment location. The high-tech and biotechnology sectors in particular remain the focus of strong interest. The foreign investors’ positive attitude is also based on the companies’ primary values, which are anchored in their patents and employee know-how and can be easily moved abroad in times of crisis. Siemens, SAP, Volkswagen, Daimler, Deutsche Telekom, Bosch Siemens household appliances, Henkel, BASF, and Bayer are the most important German investors. This commitment is reflected in research agreements with Israeli tertiary institutions and research units.