The innovation paradox: Why research so rarely translates into commercialisation

Austria’s research and innovation (R&I) system is robust: R&D intensity stands at 3.34%, science and industry collaborate closely, and the country performs well in patents and export quality. Yet, despite these strengths in knowledge generation, the transfer of research into commercialisation occurs too infrequently. This innovation paradox—the gap between research and market—is one of the system’s greatest weaknesses and undermines Austria’s competitiveness.

In a working paper, we examined Austria’s innovation paradox in greater depth, drawing on findings from the 2026 STI Monitor and the conclusions of a panel discussion with Theresia Vogel and Georg Kopetz, to identify its root causes and potential solutions.

Systemic deficits hinder technology transfer, while the Industrial Strategy supports R&I policy levers

The reasons are systemic. For instance, there is a shortage of risk capital for deep tech and AI—venture capital accounts for just 0.02% of GDP, compared to an EU average of 0.06%. The SME-dominated structure often lacks the financial capacity to scale up alone, while high market entry barriers and slow approval procedures further stifle innovation. At the same time, digitalisation lags behind: only 28.7% of SMEs use artificial intelligence technologies, whereas leading countries see adoption rates of around 37%. Above all, there is a lack of end-to-end pathways from IP decisions through prototyping and pilot customers to international scaling. Public procurement, with its annual volume of €70 billion, is also underutilised as a lever for innovation.

Austria’s Industrial Strategy 2035 provides important impulses for the R&I system: a location fund is intended to mobilise private capital, regulatory sandboxes are set to accelerate approvals, and innovation-oriented procurement aims to create lead markets. Our analysis reveals that none of the relevant R&I policy levers are entirely overlooked in the Industrial Strategy 2035. However, from an R&I system perspective, there remains a need—not only for implementation but above all for greater specificity—in areas such as spin-off and IP processes, AI and data innovation, and the mandatory linking of monitoring, governance, and budget decisions.

From a funding logic to an agile mobilisation approach

The effectiveness of Austria’s R&I system hinges on a paradigm shift—from a funding logic to an agile mobilisation approach that strategically uses public funds as levers for private investment, market introduction, and transformation. Research, financing, and regulation must be managed as a continuous, though not necessarily linear, process to turn knowledge into tangible market and scaling success.

This does not mean Austria should adopt a foreign innovation model; rather, it should build on its own system, which already has many strengths and advantages. Leveraging its strong SME structure and broad industrial base, Austria must prioritise European scaling, private risk capital markets, and industrial lead markets.

The innovation paradox is an economic and political urgency

As the working paper demonstrates, Austria’s innovation paradox is not a theoretical debate but an economic and political urgency. Resolving this paradox could unlock the full potential of Austria’s R&I system, thereby strengthening the country’s prosperity, sovereignty, and future resilience.