There are many books and articles that try to answer that. “Start-up Nation” and “The Israel Test” are probably the best. Mitt Romney gave his thoughts during his recent visit. Here is another in an opinion piece from Jordan Weissmann.
http://www.theatlantic.com/business/print/2012/08/its-not-just-the-culture-stupid-4-reasons-why-israels-economy-is-so-strong/260610/