Lessons From Startup Nation: Innovation and Mexican Development

In a world where economic competitiveness increasingly depends on the ability to innovate, investment in research and development (R&D) has become a cornerstone for driving sustainable growth, productivity, and resilience. In this context, Mexico has a great opportunity to complement its resilient manufacturing-based economy with a knowledge-based one. The case of Israel, globally recognized as the “Startup Nation,” offers valuable lessons.

Mexico and Israel: Two Realities, One Shared Ambition

While Israel allocates about 5.6% of its GDP to R&D — one of the highest percentages in the world — Mexico invests only 0.3%, according to OECD data. This gap not only reflects different budgetary priorities but also a divergence in economic development strategies and in the articulation among the public, private, and academic sectors.

Israel, with a population smaller than that of the metropolitan area of Mexico City and limited natural resources, has strategically invested in human talent, technological innovation, and multilevel collaboration to develop a thriving ecosystem of startups, research centers, and multinational companies. Mexico, with its strong foundation in manufacturing and a large, dynamic workforce, has the potential to further strengthen its innovation ecosystem by fostering greater synergy between academia, industry, and government. 

For example, according to the Mexican Institute for Competitiveness (IMCO)’s 2022 International Competitiveness Index, Israel reports approximately 1,976.7 patent applications per million economically active people, while Mexico registers 269.6, highlighting a promising opportunity to enhance knowledge-based development. However, both countries share a common ambition: to create a fertile environment for innovation, improve competitiveness, and build more prosperous and inclusive societies.

Lesson 1: R&D Is Not an Expense, It’s a Strategic Investment

One of the key takeaways from the Israeli model is its strategic approach to R&D investment. Since the 1980s, Israel has understood that investing in science and technology is not a luxury, but an existential necessity. The establishment of the Israel Innovation Authority (IIA) has enabled the government to channel public funds into priority areas with a focus on impact, scalability, and public-private collaboration.

Mexico still has room to increase its science and technology budget, thus unlocking its potential to generate applied knowledge and proprietary technology. Reactivating R&D spending and linking it to industrial, energy, health, or environmental policies is essential to transform the current economic model.

Lesson 2: Innovation Requires an Ecosystem and Culture

Innovation does not emerge in a vacuum. Israel has cultivated a vibrant ecosystem where top universities, incubators, venture capital funds, government programs, and disruptive startups converge. But beyond institutions, what stands out is its culture of innovation: a mindset that tolerates failure, encourages critical thinking, and promotes problem-solving from a practical perspective.

Fostering a similar culture in Mexico means transforming the way we teach, invest, and manage risk. Universities must stop being isolated knowledge islands and become platforms for open innovation. At the same time, the government must play a more active role as an innovation buyer — a tool that has been key in Israel to scale early-stage technologies.

Lesson 3: The State as an Enabler

In Israel, the state has gone beyond the role of regulator, it has become an enabler of innovation. From R&D subsidies to co-investment funds and international partnerships, the Innovation Authority has designed smart mechanisms to trigger private investment, promote sectoral clusters, and support the global expansion of local startups.

Mexico’s public sector could play a similar role through:

• Govtech programs that connect startups with public challenges.
   

• Public procurement for innovation, to pilot technological solutions in areas like health, mobility, security, and the environment.
   

• Co-investment and seed funding mechanisms focused on strategic sectors.
   

• Coordination among state governments, universities, and companies to build regional innovation hubs.
   

A promising example is Nuevo Leon, where an ecosystem is beginning to form around Industry 4.0, backed by academia, government, and the private sector. However, this type of model must be scaled and replicated nationwide.

Lesson 4: International Collaboration and Tech Diplomacy

Israel has effectively leveraged its diplomatic network to project its technological capabilities globally. Through commercial offices specializing in sectors such as cybersecurity, telecommunications, artificial intelligence, water, health, and energy, it has promoted the internationalization of its startups and opened doors to new markets. Additionally, it maintains scientific and technological cooperation agreements with multiple countries, which include joint funding, researcher exchanges, and binational project development.

Mexico can and should strengthen its science and technology diplomacy, using its network of embassies and trade offices to connect talent, attract innovation investment, and promote international R&D agreements.

What’s Next for Mexico?

This is not about replicating Israel’s model — shaped by its own unique cultural, geographical, and historical context — but about drawing inspiration from its core principles and adapting them to Mexico’s national context. Mexico possesses remarkable talent, creativity, and sectors with significant innovation potential, such as clean energy, agribusiness, digital health, sustainable mobility, and advanced manufacturing. By fostering a long-term strategic vision, strengthening investment in R&D, and enhancing coordination across sectors, the country can accelerate its transition toward a more knowledge-driven economy.

Israel proves that innovation is not exclusive to highly industrialized nations, but to those that invest with vision, collaborate with intention, and dare to think differently. Today, Mexico has a unique opportunity to redefine its development model. Betting on innovation is not just an economic decision, it’s a commitment to the future we deserve.