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How strategic public procurement can help resolve the innovation paradox
24. August 2026
Austria’s public procurement sector, with annual spending of around €70 billion—and €2 trillion across the EU—is not only a major economic driver but also a powerful catalyst for innovation. When deployed effectively, it can generate the demand needed to bring new solutions to market. This makes it a critical player in addressing Austria’s innovation paradox, a challenge explored in FORWIT’s Science to Business focus area.
It is no coincidence that, in July, the federal government announced plans to align public procurement more closely with innovation strategy and economic impact, targeting key technologies in particular. By the end of the year, it aims to publish the National Action Plan for Strategic Public Procurement.
To assess how well EU countries are leveraging procurement as a tool for innovation, the European Commission conducted a benchmarking exercise as part of its final report on the EU Innovation Procurement Observatory (EU-IPO) (including the Country Report Austria). This involved evaluating national policy frameworks and investments in innovation procurement. The report was accompanied by an expert analysis of the legal barriers to innovation procurement in the EU.
These developments prompt us to compare the EU-IPO’s findings for Austria with the insights from our working paper, “The Innovation Paradox: Strategic Approaches to Reducing the Transfer Gap and Advancing the RTI System”. The goal is to highlight existing strengths and untapped potential in innovation procurement to address the transfer deficit.
Innovation Procurement Observatory: Austria ranks 3rd—with just 52%
According to the European Commission’s May 2026 final report (based on 2024 benchmarking data), Austria scores 52.02%, placing it third—behind Finland (70%) and Estonia (52.43%). While this is well above the European average of 33.05% (across 27 EU member states plus the UK, Norway, and Switzerland) and categorises Austria as a “moderate performer”, the figure reveals a sobering truth: Only about half of the possible measures to promote innovation procurement are actually implemented.
The EU-IPO highlights Austria’s strong legal foundation—such as the Federal Procurement Act 2018—and specialised, capacity-building institutions like the PPPI Service Centre, which also oversees the Action Plan for Sustainable Public Procurement and is based at the Federal Procurement Agency (Bundesbeschaffung GmbH). The report emphasises the importance of Austria’s 2012 National Action Plan for Strategic and Innovative Public Procurement, supported by RTI policy and extensive—if fragmented—capacity-building efforts.
Austria also leads in ICT policy, scoring 100% in the benchmarking (EU average: 63%). Initiatives like the AI Mission Austria 2030 and the Broadband Strategy 2030 explicitly position the public sector as a reference customer for emerging technologies. This role is crucial for knowledge transfer, as it lowers market entry barriers for start-ups and SMEs, sets standards, and shapes markets. At the same time, it validates and scales innovations, easing the risky transition from research to commercialisation—precisely the phase identified as a key weakness in a FORWIT exploratory study.
Additionally, Austria’s Open Innovation Strategy addresses collaborative innovation by promoting cross-sector partnerships.
These measures demonstrate how Austria intends to use public demand to pull innovations through the “valley of death”—the phase where many promising projects fail due to insufficient support from either research or the market.
Deficits and …
However, the report also reveals a number of systemic deficits that contribute to the innovation paradox. While Austria defines key aspects and processes of innovation procurement, these definitions deviate from EU standards. Others, such as a clear delineation of the early adopter phase (the first 20% of buyers for a new solution), are missing. This creates regulatory fragmentation, leading to legal uncertainty, high administrative burdens, and barriers to cross-border markets—despite the fact that a common language is essential for successful knowledge transfer.
The EU report also points to the absence of national spending targets for innovation procurement. The European Commission recommends a target of 20%—currently, the EU average is 10.6%, while Austria achieves just 2-3%—and calls for the introduction of a suitable measurement framework. Without targets and KPIs, progress cannot be tracked, and procurement officials lack incentives to prioritise innovation. Activating this potential would have a direct and positive impact on knowledge valorisation, aligning with our working paper’s arguments for a results-oriented, measurable RTI policy.
According to the EU-IPO, preliminary market consultations are used in Austria in only 0.03% of cases (compared to an EU average of 1.39%). Yet, early dialogue between procurement officials and innovators can reduce mismatches between supply and demand—and thus address a root cause of the innovation paradox: the lack of product-market fit. When procurement and businesses collaborate from the outset, solutions are better tailored to real needs. Currently, however, risk-averse procurement practices and a lack of dialogue reinforce the paradox, which is why our working paper advocates for experimental, iterative procurement approaches.
… untapped potential
The EU-IPO identifies further potential in IPR (Intellectual Property Rights) rules, where Austria scores just 25% (EU average: 40%). This is because there is no standard scenario for the distribution of IPR between procurement entities and (sub)suppliers, forcing public procurers to define IPR allocation themselves—further contributing to fragmentation. Clear, transparent, and standardised IPR regulations could encourage businesses to engage in innovation procurement, ensuring that publicly funded R&D translates into private-sector commercialisation.
Sectoral imbalances also leave potential untapped. Only half of Austria’s horizontal and sectoral policies—including education, health, and the environment—strategically promote innovation procurement (EU: 30%; UK: 90%). It is reasonable to expect that the forthcoming National Action Plan for Strategic Public Procurement will address sectors that have not yet been aligned, such as construction, security, defence, and public administration.
In this context, the importance of mission-oriented procurement for key technologies must be emphasised. If Austria aligns procurement more closely with national missions—such as climate neutrality or digital sovereignty—the resulting secure demand can create a pull effect, accelerating transfer in strategic areas. Here, existing EU instruments—such as those from Horizon Europe or EAFIP (Pre-Commercial Procurement, Public Procurement of Innovative Solutions)—could be optimally combined. The EU-IPO notes that the Quantum Austria Initiative, for example, missed an opportunity by failing to explicitly link procurement, thereby forgoing a chance to bring quantum technologies from the lab to market.
Another lever, according to the EU-IPO, is the expansion of risk-sharing mechanisms, such as grants or guarantees for procurers and suppliers in high-risk but high-innovation sectors like AI and cybersecurity. The findings of FORWIT’s exploratory study, “From Science to Business”, also show that financial risk mitigation is critical for transferring knowledge into commercialisation in emerging fields, as it gives companies the confidence to invest in innovative solutions.
Conclusion
It is encouraging that the federal government intends to design the new National Action Plan for Strategic Public Procurement with a strong innovation focus, closely linked to the industrial strategy—and thus, key technologies. If this national plan incorporates the recommendations and insights from the Innovation Procurement Observatory and the expert report on legal barriers, it could trigger the necessary positive effects in knowledge transfer, creating value, jobs, and future opportunities in Austria.
Austria already has the tools in place. Now, the task is to deploy them wisely and systematically through the future Action Plan for Strategic Public Procurement to make a meaningful contribution to resolving the innovation paradox.
