We have analyzed to market failures in this respect:
Myopia
This phenomena causes a project to not be realized despite it is financially viable, because of short sightedness. Investors are often hesitatant to invest in projects that will bear fruit in the distant future. This common market failure comes into effect in marine bio technology, partly because the field is still in its infancy. We have found that its total world market is 4.1 billion dollars and growing by about 10% a year. This means that much more basic research in the field is needed before it becomes commercially viable. Also, businesses are often hesitant to get into ventures that start with a professor in a research lab and this applies in this case too.
Information
Entrepreneurs, businesses and researchers are not aware of government support programs in the field of marine biotechnology, which struck us as odd at first, especially in this digital age. Why was almost every interviewee we spoke to in the Eilat area not aware of the various programs which could grant him many benefits?
A possiable explanation can be that Eilat has one of the lowest ratios of lawyers per capita in Israel. Attorneys, accountants and economic consultants have an important role to play in promoting small businesses and helping them make the most out of government support plans.
Furthermore, the dearth of government officials from Eilat prevents the unofficial exchange of information, which happens in the business and government hubs of Israel, Jerusalem and Tel Aviv. Even if researchers and entrepreneurs would search online and learn about the government rights and benefits they are entitled to, another factor must be considered, the disadvantage of small size.
The fact the Eilat's bio technology market is made up of many small businesses means that they will almost always perform not enough R&D and will not use available government benefits, simply because they believe that the benefits they will produce are not worth the administrative cost associated with them . Added to this is a basic suspicion of the government's will and ability to assist SMEs, even if it is not based on fact.
Recommendations
In July 2012 the Israeli government adopted a resolution to review the setting up of a consortium of companies in Eilat which is supposed to address the market failures in developing marine bio technology in the area.
This consortium, whose establishment was one of the recommendations of a report authored by Adalya, is based on a Norwegian model, applied in Tromso, Norway. Tromso is a world hub of marine bio technology and has learned how to address the difficulties stemming from it being in a remote area, like Eilat. According to this model, the government steps in as the entrepreneur, acts as an agent of knowledge and takes on some of the financial risks.
The goals behind developing marine biology and marine biotechnology in Eilat are to diversify the employment base of the area. If this model was to succeed it could mean a breakthough in the development of the remote areas of Israel and would set an excellent example to the role of the government as the driver of positive change.