Israeli Business in Transition

Despite the burden of an enormous defense budget, the absorption of immigrants, its tiny size and the scarcity of natural resources, Israel’s economy, albeit with considerable financial aid from abroad, was able to achieve impressive growth rates. This was to a great degree accomplished by putting a heavy emphasis on education and by rapidly achieving a high degree of industrialization through government policies and incentives. But in recent years, with increasing government deregulation and enormously altered global power structures Israel is faced with a dynamic new reality. Israel's ability to continue or even heighten its growth rate will be very much dependent on the ability of the individual businesses to adapt and adjust rapidly to these new realities. This study of organizational learning in Israel was undertaken in order to understand what factors and mechanisms are involved in Israeli companies' ability or lack thereof to successfully cope with the challenges of this rapidly changing environment. Top executives representing more than 55% of the companies employing 500 workers or more, were interviewed. Two distinct patterns of learning, related to three basic elements, emerged from the data. These elements are the image of the individual employee, the organizational and decision-making structure of the company, and the specific corporate culture. Of particular interest in Israel is the significant number of companies which exhibit mixed features of these two learning patterns. In these “hybrid“ companies, which tend to have a history of centralized learning characteristics, there is a growing interest in the flexibility commonly associated with decentralization and the flattening of hierarchical pyramids of decision-making. The study also discusses factors that promote or hinder organizational learning such as crises and success.