Israel is perceived in the international environment as one of the top leaders in innovation. This is proven by the progressively high position of this country in international rankings and the participation of Israeli scientists and technologists in prestigious international programs. In this article, we claim that the aims of Israeli innovation policy, which has the biggest impact on the shape and content of the innovation ecosystem, are highly politicized. The status quo driven by the key assumption of the state strategy, according to which obtaining a competitive predominance in the political international environment will be achieved through economic instruments, primarily technological innovation. Therefore the aim of this article is to critically analyze Israeli innovation policy and the innovation ecosystem, paying special attention to the state interest and the government activities in this realm. For the purpose of this analysis, some basic assumptions of the neoliberal economy redefined by Arie Krampf will be utilized. Furthermore, to better describe and explain the link between politics and economy in the Israeli innovation ecosystem we will refer to the K.N. Waltz considerations on mechanisms of the political and economic system in a globalizing world.