The annual RIO Country Report offers an analysis of the R&I system in Austria, including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Austrian research and innovation system and assesses the policy response.
The Austrian private sector is strong in R&D, with BERD having grown continuously in absolute terms from €5,520m in 2010 to €6,963m in 2014. The country is ranked 7th in business R&D expenditures. Employment in medium- and high-tech manufacturing is comparatively high at 5.8% (Netherlands: 2.7%, Belgium: 4.7%, Ireland: 5.2%). Given these indicator values, the innovation performance of the private sector has been somewhat disappointing. Austria ranks only 23rd in non-R&D innovation expenditures. In the Innovation Union Scoreboard, Austria has slid down continuously from 8th to 11th rank between 2011 and 2015. Turnover from innovation as percentage of total turnover has fallen from 13.6% in 2006 to 9.8% in 2012, a drop to which services contributed slightly more than industry. Lastly, Austria is in the lower third of countries in terms of sales of new-to-market and new-to-firm innovations (rank 22).
The negative trend of Austria's innovation performance is despite an array of public support instruments for private R&I which has been built up over the past two decades. There has been a proliferation in measures, supporting in particular SME innovation and cooperation between public research institutions and SMEs. This appears to have led to a certain degree of fragmentation, spreading available funding over a plethora of instruments. Although most older measures have been evaluated and received favourable assessments individually, overlaps or potential synergies between them have mostly been left unexplored, and coordination between initiatives has been limited.
Analysts have also speculated that modest efficiency could be a consequence of the substantial shift from direct to indirect support during the past decade. The share of tax incentives for R&D expenditures in the policy mix has increased by 42% from 2006-2011 (latest available year). In 2011, tax incentives were consolidated into a single unified tax refund instrument, the research premium ("Forschungsprämie"). Up to 10% of a company's R&D expenditure (including up to €1m for extramural research) can be deducted from taxable income, and carry-over and refund is allowed. Foregone tax revenue was €572m in 2012, €377m in 2013 and €495m in 2014. The strong increase was partially at the expense of funds for direct support, which may have reduced the funding system's capability to respond flexibly to specific and changing needs. Furthermore, 74% of indirect funding went to large enterprises in 2014 (77% in 2012), which has instilled a debate whether the instrument is effective in its main aim to increase R&D activity of SMEs.
To support private R&I activities broadly and indiscriminately, the research premium will be increased from 10% to 12% in 2016. The application procedure, which includes certification of the applicant firm by the Austrian Research Promotion Agency (FFG), has been further simplified in 2013 and 2014 to induce more SMEs with low administrative capacity to apply. An evaluation of the instrument's effectiveness had been postponed during 2015, but is now likely to take place in 2016.
Direct support instruments have been streamlined to a certain degree over the past years. Common funding rates have been introduced, administrative procedures simplified and reporting requirements harmonised across instruments. On the other hand, although some measures that have reached the end of their budgeting period have been discontinued, FFG and AWS still manage a large portfolio of instruments that provide support for private R&D and innovation activities.
New initiatives in the past few years have increasingly focused on improving knowledge transfer and science-industry cooperation in order to boost private sector innovation performance. Several programmes have been expanded where companies conduct applied and fundamental research jointly with public research institutes (COIN, Christian-Doppler-Laboratories, Laura-Bassi-Centres). Additional Competence Centres for Excellent Technologies (COMET) are planned to be set up, a scheme which has received favourable evaluation results. Their role is to facilitate knowledge transfer and cutting-edge private R&D through collaboration between science and industry in jointly defined long-term research programmes. In order to improve commercialisation of research results, regulation on IPR of publicly funded research is currently under revision. The development of a comprehensive national strategy on intellectual property is expected for 2016.
The regional smart specialisation strategies of Austria's Bundesländer contain the Lead Institution Initiative, which aims to empower research institutes to become central nodes of regional innovation networks including business, regional policy makers, and civil society. The intention is to grow dense local or regional networks that are able to create and exploit synergies from the individual strengths of participants. The RIS3 process has been somewhat protracted in Austria. Whereas both the federal and Bundesländer governments have been quite active in contributing to peer reviews of other regions, no Austrian region has undergone a peer review to date. Unclear allocation of competences for strategy implementation and spending between the federal and the Land level has been an obstacle in the approval process, and has not yet been entirely resolved. The contribution of Structural Funds for the period 2014-2020 to the relevant Operational Programme that includes R&I is relatively low (€536m), and has decreased compared to the previous programming period.
The mere fact that large companies received the biggest share of the research premium does not in itself mean that it fails to induce R&D investment in SMEs. However, the additionality of the scheme has never been assessed. A comprehensive evaluation of the instrument would be important to determine its effectiveness in boosting private R&D and whether the substantial shift from direct to indirect support was justified. However, the postponement of the evaluation to 2016 carries also the advantage of having produced further data points in a relatively short time series, which might allow for somewhat more robust results.
The multiple instruments to support knowledge transfer and science-industry cooperation have received mostly favourable evaluations regarding their effectiveness, but their comprehensive impact on Austria's private innovation performance has so far been modest. A stronger focus on innovation instead of R&D, as well as further consolidation and streamlining of direct support instruments, might advance the system's efficiency.
The regional smart specialisation strategies and the Lead Institution Initiative hold significant promise for addressing structural weaknesses in the country's R&I system. The latter was highlighted as a best practice for RIS3 implementation by an EC expert panel. However, a clear definition and implementation of multi-level coordination and competences seems essential for the strategies' eventual impact on regional private R&I capacity. Moreover, indicators and mechanisms for monitoring RIS3 implementation still have to be developed.