Israel-founded businesses in Boston generated over $18 billion in economic benefit to Massachusetts in 2015. Photo: NEIBC.

Israeli innovation is proving to be a major driving force behind the Massachusetts economy, a new study found.

According to a report commissioned by the New England-Israel Business Council (NEIBC) on the economic link between Israel and Massachusetts, over 200 Israeli-founded business in Boston generated $9 billion of revenue in the state in 2015 — and more than $18 billion in total economic benefit. The rate of revenue growth, the report said, was more than two times faster than the growth of the state’s economy from 2013 to 2015. In total, business by Israeli-founded companies operating in the greater Boston area and across Massachusetts represented nearly four percent of the state’s GDP in 2015.

These same companies directly employed some 9,000 people in the state and — based on a multiplier effect of their demand for goods and services — supported over 27,000 jobs. The employment base for Israeli-founded businesses in the state grew five times faster than the state’s economy from 2013 to 2015, the study found.

When it comes to investment, Israeli-founded companies secured over $1.2 billion in venture capital (VC) from 2013 to 2015 — representing 10 percent of all VC funds raised in the state — and over $10 billion was paid back to investors. Sixty-seven percent of the investment funds came from out of state — with most investors located in Israel, Silicon Valley and elsewhere — thereby being responsible for bringing a significant amount of outside and new capital into Massachusetts. Regarding the rate of VC investment, the report noted that 2015 saw the highest raised capital by Israeli-founded businesses and the rate of investment is accelerating.

According to the study, Israel and Massachusetts — especially Boston — share strong and unique commonalities that make each attractive to entrepreneurs. “Especially for Israeli founders, Massachusetts has special advantages and connections that meet their needs and interests and that are often superior to what other geographies can offer,” the report said.

Advantages and connections cited by the report include a thriving startup ecosystem; lower cost of living, business and taxes as compared to California and New York; Boston is a lot easier and cheaper to reach than Silicon Valley; and prestigious Massachusetts universities — such as MIT, Harvard, Brandeis, Berklee and Boston University — serve as bases of initial exposure for many future Israeli founders of Boston-based businesses.

The independent study — “The Massachusetts-Israel Economic Impact Study, 2016 edition: The Boston-Israel Power Partnership” — was carried out by Stax, Inc., a global strategic consulting and research firm. The 2016 edition updates prior studies from 2010 and 2013 released by NEIBC, which according to its mission statement, “fosters partnerships, investment opportunities, and other collaborations that build mutually beneficial business ties between Israel and New England, and its regional hub city of Boston.”