Although Austria makes high investments in research and innovation by international comparison, its performance and competitiveness continues to fall behind internationally. Within the framework of Technology Talks Austria 2025, FORWIT is now calling for increased attention to the efficiency of invested funds in light of the budgetary situation.

Austria’s performance and competitiveness is falling behind internationally


“There is much untapped potential that must be unleashed.”

Thomas Henzinger

The longest recession of the Second Republic, the decline in the European Innovation Scoreboard from 6th to 8th place and the fall in the IMD Competitiveness Index from rank 16 (2020) to now 26 are signals that must be taken seriously and call for swift and targeted action. “Austria’s investments in research and innovation are amongst the top tier in Europe. However, the financial input is not generating the expected output. We have been observing this development for years – not least in the STI Monitor: Austria achieves significantly less output with approximately the same input as the Innovation Leaders. There is much untapped potential here that must be unleashed,” appeals the Council Chair Thomas Henzinger.

Austria risks the successful development of recent decades, which has produced considerable scientific, social and economic results, coming to an end.

No “Business as Usual”: Budgetary Situation Forces Tangible Efficiency Improvements

FORWIT will continue to advocate for a growth path of RTI investments and considers the target of a research quota of 4%, also anchored in the government programme, to be essential. Given the fiscally and economically challenging situation, it is now all the more important from FORWIT’s perspective to focus on the efficiency of deployed resources and to tangibly increase their impact. “A ‘business as usual’ approach, simply increasing input without structurally developing the system further, will not secure our prosperity, security and democracy in the long term,” warns Henzinger.

Viewing the RTI Pact in Conjunction with Other Instruments

FORWIT sees considerable potential in the future of the RTI Pact, which is currently being negotiated for the years 2027 to 2029 and for which the Council has already published its recommendations.

“Austria should increasingly redirect its primarily funding-oriented RTI policy towards demand orientation.”
Sylvia Schwaag Serger
For future RTI Pacts and other innovation policy instruments to realise their full potential, FORWIT considers it necessary to view them in the context of their interaction with other steering and financing instruments – such as higher education financing and indirect research funding – and to optimise framework conditions. “Austria should increasingly redirect its primarily funding-oriented RTI policy towards demand orientation and, parallel to the RTI Pact 2027-29, strengthen innovation demand through innovation-promoting public procurement and regulatory standards – particularly in the security and defence sector as well as in the energy and climate sector,” explains Deputy Chair Sylvia Schwaag Serger.

The evaluation planned in the government programme for 2027 offers the opportunity to adopt a systemic perspective in order to optimise the RTI system holistically and develop it further in an impact-oriented manner.

Actively Shaping European Framework Conditions

“We call upon the Federal Government to treat the implementation of the Capital Markets Union as a priority in European discourse.”
Sylvia Schwaag Serger

At European level, Austria, which benefits considerably from a research-strong EU, should engage actively in completing the single market and advance the European integration process both strategically and communicatively. “If we want to effectively strengthen European technology companies in the increasingly fierce competition with China and the USA, the Capital Markets Union in particular must be implemented swiftly. Austrian companies especially would benefit from this, which is why we call upon the Federal Government to treat implementation as a priority in European discourse,” maintains Schwaag Serger.

“Research, technology and innovation hold the keys to mastering current and future challenges. We can only secure Austria’s prosperity, security and democracy if we do not slacken in our innovative and technological efforts whilst simultaneously optimising the existing RTI system holistically,” affirms Henzinger regarding the urgency of this task.

A fundamental improvement in the situation of new enterprises is among the declared priorities of the European Commission (EC) to restore the competitiveness of the European Union to a global level. Over the summer, two legislative initiatives were launched to this end: the European Innovation Act and the 28th Regime.¹ Both are intended to enhance the framework conditions, including better access to finance, a Union-wide legal form, and other regulatory measures.

The issue has been a long-standing concern and gained new urgency with the so-called Draghi Report published a year ago, which is also reflected in the Competitiveness Compass. As a significant intermediate step, the EC published a Startup and Scaleup Strategy at the end of May 2025, which aims to define the conditions to enable European startups to rise to globally competitive players. Given its central importance, it is worthwhile to briefly analyse this strategy.

The strategy encompasses five key action areas, each containing central policy recommendations: (i) Smarter, Founder-Friendly Regulation, (ii) Better Access to Finance, (iii) Market Access and Public Procurement, (iv) Talent and Skills, and (v) Infrastructure and Support Ecosystem. Fundamentally, the strategy addresses those challenges that have been identified as central in Europe over the past ten years, such as late-stage financing, regulatory barriers, and talent shortages.

A strength of the strategy lies in its goal to harmonise key framework conditions within the EU more effectively, for example in the area of company formation. Such harmonisation could be crucial in facilitating cross-border scaling of startups. This is particularly important because Europe has so far lagged significantly behind leading innovation countries such as the USA and China, especially during the growth phase (scaleup phase).

Nevertheless, the strategy also entails certain risks—such as implementation uncertainty, since many of the proposed measures require cooperation among all Member States. A lack of cooperation could therefore hamper the implementation of key reform projects.

Challenges: IPO markets, capital market, and tax policy

The exit market in Europe continues to face major challenges. FORWIT council member Georg Kopetz notes: “IPO markets are less liquid and significantly smaller than, for example, NASDAQ. Moreover, compared to the USA and China, there are considerably fewer large European tech corporations that could act as potential buyers. Risk aversion is also significantly higher in Europe than in the USA, China, or India.”

Added to this is the fragmented capital market. According to Invest Europe and OECD, venture capital investment per capita in the EU is significantly below that of the USA and the UK. Europe has more seed financing but fewer Series B+ or growth capital rounds. Unicorns (valued over €1 billion) thus occur less frequently, partly because startups sell earlier or relocate—and this is reflected, among other things, in lower productivity compared to the USA.

Beyond these structural market conditions, tax policy design plays a crucial role in the competitiveness of European growth companies: the IMF concludes, regarding Europe’s productivity gap with the USA, that the current tax structure in Europe is not optimal for promoting fast-growing firms. ² More efficient support for corporate growth requires avoiding size-dependent fiscal and regulatory incentives for companies or aligning incentives more closely with corporate R&D investments. ³ This could include measures such as accelerated depreciation and tax credits for R&D investments rather than broad cuts in corporate tax or indirect support for businesses. Tax incentives for research and development can be designed to support young, innovative enterprises. ⁴

Proper ambition must be coupled with proper implementation

With the Startup and Scaleup Strategy, the EU aims to further develop Europe into an active platform for the creation and dissemination of innovation. It complements several other activities mentioned in the Competitiveness Compass, all of which fall under the theme of competitiveness. These implementation steps at the European level will reveal how effectively the fundamentally correct ambitions are realised. Even though the strategy promises simplified regulations and innovation-friendly framework conditions, there is a risk of increased regulation—for example, due to rising bureaucratic burdens in implementing and applying the support measures foreseen in the strategy.

Fundamentally, care should be taken not to spread resources too thinly across numerous small-scale initiatives but rather to focus on a few, internationally competitive scaleups. FORWIT will intensify its investigation of the ecosystem for startups and scaleups within its STI competitiveness workstream, not least in light of the legislative initiatives mentioned above.

1. At present, both initiatives are open to public consultation, allowing submissions to the European Commission. For the 28th Regime here (deadline: 30 September) and for the European Innovation Act here (deadline: 3 October 2025).↩
2. See International Monetary Fund (2024), Regional Economic Outlook: Europe’s Declining Productivity Growth: Diagnoses and Remedies, Note 1, November 2024.↩
3. See Benedek, D/Pragyan D/Garcia B/Saksonovs, S/Shabunina A/Budina N (2017), “The Right Kind of Help? Tax Incentives for Staying Small”, IMF Working Paper 17/139.↩
4. See Mitchell, J/Testa G/Sanchez Martinez, M/Cunningham, P/Szkuta.K (2020), “Tax incentives for R&D: supporting innovative scale-ups?”, Research Evaluation 29(2), pp. 121–134.↩

At the end of May, FORWIT presented its annual analysis of the Austrian STI system in Parliament. The STI Monitor provides an international comparison of the performance of the Austrian STI system based on more than 280 indicators. This analysis is freely accessible and intuitively designed, allowing different perspectives on the STI system, from the framework conditions, through the core system and cross-cutting themes, to its impact. The following summary represents only a small excerpt from the extensive analysis by FORWIT. Based on the presentation on 26 May 2025, it focuses on the innovation processes in the STI core system by comparing policy indicators for performance support (input indicators) and performance indicators (output indicators).

Methodologically, the efficiency measurement follows Data Envelopment Analysis, a multifactor productivity analysis model for estimating relative efficiency. The presentation begins with a critical assessment of the efficiency of the science system (including higher education and non-university research and their funding) and then analyses the entrepreneurial STI performance in Austria. Special attention is given to the competitiveness in STI measured by key technologies, which has been included as a new category in the analysis. Finally, the use of the transformative key technology Artificial Intelligence (AI) in Austrian companies is examined in more detail.

I. Efficiency and the Dimension of Science

Scientific Sector

The composite indicator “Science” in area D.2 Efficiency, which represents an average of all related indicators, shows a relatively constant development for Austria below the level of the comparison groups. An interesting comparison point is Iceland, which has been among the top three countries since 2024. Despite its small size, Iceland has achieved a leading position worldwide through early and consistent focus on niches such as genomics and the central use of health data. This underscores that even smaller economies can achieve international visibility and leadership roles through clear research policy focus and strategic specialisation. In contrast, Austria pursues a more diversified approach aimed at the breadth of the innovation system.

R&D Expenditure: Measured as a share of GDP, Austria ranks second (behind Denmark, ahead of South Korea) among the top nations. This indicates a high political prioritisation of R&D. In terms of actual expenditure per capita (measured in US dollars at purchasing power parity), Austria is above the average of the Innovation Leaders, with Switzerland leading.

Number of Researchers: Austria has a value of 2.35 (in full-time equivalents). Greece is notable in the top three, which is due to a strong concentration of R&D activities in the public sector. In contrast, the industrial R&D base is weak compared to Austria.

Funding

Private Funding Share: In Austria, around 66.9% of gross domestic expenditure on R&D (GERD) is financed by the business sector. Although this is two-thirds of all expenditure, it is slightly below the EU average. A high private share is positive as it indicates a strong link between R&D and value creation, and thus a market-oriented innovation dynamic. Ireland is a top country here due to the presence of global tech and pharma companies, favoured by low taxes.

Public Funding (Higher Education Sector): Austria invests around 0.6% of GDP in R&D in the higher education sector, making it one of the top three countries. The country traditionally has a strong public FTI sector with universities, non-university institutions, and universities of applied sciences. This supports the many small and medium-sized enterprises (SME) that often conduct R&D in cooperation with these institutions.


Indirect Funding: The Austrian research premium of 14% is a strong location policy instrument but is not statistically attributed to the private funding share. This potentially leads to an underestimation of the private contribution. Internationally, Austria has slightly fallen behind in this form of funding and ranks ninth.

Project-Funded Basic Research: In project-related funding for basic research, Austria’s per capita funding is comparatively low, indicating a below-average level compared to the nine countries considered.

Number of Publications: Per 1,000 inhabitants, Austria is above the EU average. Switzerland, which has a particularly high publication density, Denmark, and Norway lead here.

Quality of Publications: Measured by the share of publications that belong to the top 10% most cited worldwide, Austria shows high scientific relevance. Austria achieves above-average results in relation to the input in the fields of medicine, physics, materials science, and computer science.

II. The Dimension of Technology: Corporate RTI

R&D Expenditure of Companies: As a share of GDP, Austria is well above the EU average and the benchmark of the Innovation Leaders. Leading nations such as Israel, South Korea, and the USA are driven by billion-dollar corporations in sectors such as defence, biotech, and IT, while Austria’s sector is heavily SME-oriented and, like Germany and Sweden, has a broad product portfolio.

Innovative Companies: The number of innovative companies is slightly declining. This is due to methodological reasons (a stricter definition of innovation in the survey), economic reasons (uncertainty due to the pandemic, inflation), and structural reasons (declining innovation activities in traditional industries).
Cooperation with Universities: Cooperation is also declining, which is also due to a changed survey methodology. Only clearly defined projects are counted, not pure networking meetings or events as in the past.

Export Quality: Measured by price as a proxy for technology content, Austria shows a significant increase. This is due to industry-specific specialisation and the development towards technology-intensive components, but is also influenced by inflation.


Knowledge Intensity of Exports: The share of products with medium to high technology intensity is relatively stable in Austria, indicating a broad and diversified export structure. In contrast, Hungary has a narrower export focus (e.g., automotive), where knowledge intensity often arises from production for foreign companies, while R&D takes place elsewhere.

Innovation Revenue of SME: Here, there is a marked decline, mainly due to economic uncertainties and a redistribution of investments away from marketable product innovations towards internal optimisation measures, particularly in the areas of digitalisation and automation. As a result, fewer innovations with scaling potential are currently reaching the market. In addition, technological innovations typically require longer development and lead times before they become economically effective.

III. Competitiveness and Key Technologies

Innovation is a central lever for competitiveness. The STI Monitor has therefore been expanded to include the area D.3 “Competitiveness in STI”, which is analysed based on key technologies. Patent data, considered a robust indicator, serves as the basis. The analysis is based on five metrics: (i) number of patents at the European Patent Office (EPO), (ii) patents per capita for international comparability, (iii) Revealed Technological Advantage (RTA) as a measure of technological specialisation, (iv) triadic patents (applications in the EU, USA, Japan) as an indication of commercial significance, (v) citation weighting as an indication of quality. Austria files most patents in the areas of production technologies, digital technologies (especially micro/nano-electronics), and material technologies.

An example shows that high national specialisation (high RTA) does not automatically lead to an international top position: In the area of the Internet of Things (IoT), Austria has an above-average specialisation but ranks only 19th internationally. Comparing 2015-2019 to 2020-2022, there is a decline in robotics (both in patent applications and specialisation), while Austria has improved in photonics and advanced materials. The qualitative significance of patents, measured by citations, was lower in almost all technology areas in 2020-2022 than in the previous period.

Focus: Artificial Intelligence (AI)

In the area of Artificial Intelligence, Austria performs below average in all indicators. Advanced AI methods such as machine learning are rarely used; instead, text analysis and chatbots are primarily utilised. The use is mostly isolated in individual departments, lacking a structured approach in implementation and strategic, company-wide integration. Barriers include lack of competence, high costs, and data protection concerns. Notably, most surveyed companies indicate that they currently see no benefit in using AI.

IV. Conclusion

Austria’s STI system presents itself as a complex structure with clearly recognisable strengths and existing challenges. The analysis shows that the country has remarkably high scientific quality and productivity, reflected in the international recognition of Austrian research achievements. Particularly noteworthy is the traditionally strong research cooperation between science and industry, which forms an important bridge between theoretical knowledge and practical application. This close interconnection is also reflected in the technology-intensive product exports, which underline Austria’s position as an innovative business location.

Despite positive aspects, the analysis also highlights structural weaknesses that could jeopardise Austria’s future competitiveness. Significant deficits are particularly evident in the introduction and strategic use of Artificial Intelligence and the comprehensive digitalisation of the economy. These fields are increasingly becoming central drivers of international location attractiveness – making the existing deficits all the more concerning. Additionally, there is a significant lack of private risk capital, which hampers the development of start-ups and spin-offs, thus limiting the dynamics of the innovation ecosystem. Furthermore, the potential for the economic exploitation of scientific findings remains insufficiently tapped – an indication that the transformation of research results into marketable innovations is not yet consistently successful.

The overall view makes it clear that research, technology, and innovation remain central pillars of Austrian economic and location policy. To avoid falling behind in the intensified international competition, continuous and strategically oriented investments are essential. It is crucial to preserve the existing strengths while simultaneously addressing the identified weaknesses to secure Austria’s position as an innovative location in the long term.

The 6^th meeting of the FORWIT Council began on Monday 26 May 2025 with a working breakfast, which was also attended by three representatives of the federal government. Federal Minister Eva-Maria Holzleitner, Federal Minister Peter Hanke and State Secretary Elisabeth Zehetner got to know the FORWIT Council members and took the opportunity to discuss the ambitious research and innovation policy goals in the government programme. This was followed by the presentation of the STI Monitor 2025 on the premises of the parliament, where almost 100 people from all parts of the STI system listened to FORWIT’s analysis.

Two-day retreat in Baden

The Council meeting then retired to a seminar hotel in Baden for a two-day retreat together with the office staff. In addition to reports on the status of the two main topics – Studying in Austria (Head: Tom Henzinger) and Competitiveness in STI (Head: Georg Kopetz) – the meeting also discussed how FORWIT can play an active role in the coming weeks given the numerous mentions of various projects in the government programme that fall under the area of science, research and innovation. The main focus will be on analysing the higher education system in preparation for a higher education strategy 2040. However, the rapid development of recommendations for the next RTI pact, which is to be adopted by the federal government by the end of the year, is also a high priority.

Impetus for research, innovation and European networking

Intensive work was also carried out on the topics of artificial intelligence, key technologies, research security and scientific freedom. The Council also discussed the latest developments in the area of European research policy, based on the Federal Government’s reflection paper on the next research framework programme. Further networking with other council formations and advisory bodies – both internationally and in Austria – will continue to be promoted; and FORWIT will continue to advocate a proactive, European perspective on STI policy in Austria.

Every year, the presentation of the STI Monitor is also the occasion for a session and the annual FORWIT retreat. This year, the packed programme kicked off with the first joint working breakfast with Federal Minister for Women, Science and Research Eva-Maria Holzleitner, Federal Minister for Innovation, Mobility and Infrastructure Peter Hanke and State Secretary for Energy, Start-ups and Tourism Elisabeth Zehetner.

Higher education strategy 2040, RTI pact and long-term prospects

The main topics of the meeting were the federal government’s planned higher education strategy 2040 and the next STI pact. The discussion centred on the question of how FORWIT can effectively contribute its expertise to these projects. The participants agreed that in view of the current challenges – from the tight budgetary situation to the industrial crisis and declining productivity – a long-term, future-oriented STI policy is more important than ever.

The discussion emphasised the need to think beyond short-term goals and consider a time horizon of ten to fifteen years. This is the only way to ensure that Austria’s research, technology and innovation policy is sustainable in order to secure the country’s competitiveness and master social challenges.

FORWIT would like to thank all participants for the productive and motivated dialogue. The working breakfast showed how important open dialogue and cooperation are for the future of Austria.

Gallery

Sylvia Schwaag Serger, Thomas A. Henzinger und Helga Nowotny

Thomas A. Henzinger

Monika Ritsch-Marte

Sonja Sheikh, Johanna Pirker, Jörg Flecker und Georg Kopetz

Philipp von Lattorff und Monika Ritsch-Marte

Theresia Vogel

Elisabeth Zehetner

Peter Hanke, Eva-Maria Holzleitner und Elisabeth Zehetner