The world economy may remain in the doldrums, but not every economy is stagnant. With growth of nearly five per cent last year, Israel is one of the globe's most economically vibrant nations. So why is Israel doing so well when nearly everywhere else is struggling?

Professor Peretz Lavie thinks he knows the answer. It is the influence of the Technion - Haifa's university which specialises in science, technology and engineering. Lavie is president of the Technion so he cannot claim to be neutral in his views. But the university, which celebrates its centenary this month, has conducted research which backs up the view that it is a key driver of the economy.

Lavie explains: "One of the projects we undertook for the anniversary was a study on Technion graduates. We found that their influence on the Israeli economy was amazing. Seventy-eight per cent of our graduates are within the high-tech sector and of these more than half are in managerial positions."

There are other statistics which show how enterprising these graduates are. For example, one in every four Technion graduates has applied for at least one patent, and 23 per cent of them have started new companies.

Little wonder, then, that within 10 minutes driving distance from the Technion you will find offices of just about every major digital company in the world, including names like Google, Intel, Yahoo and Cisco.

At the turn of the last century, when a Jewish university was first mooted, a start-up was also on the agenda. The start-up in question, however, was a homeland for the Jews. At the time there was nowhere where for Jews to study engineering. And the Zionist Congress decided that providing such a facility should be a priority. In 1901 a committee was formed to look into the viability of a Jewish university. The cornerstone for the Technion was laid on the slopes of Mount Carmel in 1912 and, after a delay while the First World War was fought, it was opened in 1924 to teach engineering to its first intake of 16 men and one woman.

For Lavie, the Technion is unique in influencing nation-building in Israel - at first in a very literal sense, by enabling engineers to build the physical structures of the new state, but later by influencing a shift in Israel's economic direction. "Thirty years ago the icon of the Israeli economy was the Jaffa orange and now it is the semi-conductor," he says.

So how did the Technion do it? Lavie ponders: "I think there are several components to our success. First, this is a very demanding school. We don't compromise. Second, we managed to build a research tradition to add to our educational achievements."

However, perhaps the prime asset has been the students. "Lots of chancellors from universities around the world have come here. Most of them say: 'I would take all your students to my university if I could'."

Lavie, who before his appointment was a pioneer in sleep research, his also given much thought to why his students become such high-achievers after they graduate. He thinks the answer might be that they have inherited the pioneering spirit from their great-grandparents who founded kibbutzim and drained the swamps.

"We are not just a nation of start-ups, we are a start-up country. What used to be the pioneering spirit of the kibbutzniks has become the pioneering spirit of the high-tech entrepreneur. It's a feeling of wanting to change the world, of doing something that no one has done before. These are the characteristics of the Israeli entrepreneur. They don't set out to make money, although they like the money. What they want to do is to change the world. They start company after company.

"It helps that we are a non-hierarchical society. There is less distance between people in Israel. You can approach the CEO of a company who might be your mate from the army. You would talk to him on a first-name basis and shout with him if you didn't agree with him."

Whether it is the students, the institution itself or perhaps the Israeli air, clearly the atmosphere is one which encourages achievement. The Technion can boast three Nobel prizes, the latest of which was won by chemist Daniel Shechtman in 2011. And at the end of last year, Lavie discovered that the university had beaten 40 others in a competition to build a high-tech research institute in New York to rival Silicon Valley.

Not everything is in the garden is rosy, however. The Israeli government has dropped funding by 30 per cent over the past decade, meaning that faculty staff have had to be reduced by 100. Meanwhile, Lavie has needed to keep up a campaign overseas for funds to secure developments. He gives the example of the Churchill auditorium on campus which is 40 years old and badly in need of renovation. He is hoping that, given the name, a British donor might be found. "Our friends around the world are very generous . For us it is life-saving."

Lavie has plenty of plans for the future. Not all of them will succeed, but that is not something that concerns him. In fact, he sees failure as a crucial component of success. "In Israel, you are allowed to fail. It is not seen as the end of the world. This is the climate that allows people to take risks and eventually succeed."