The annual RIO Country Report offers an analysis of the R&I system in Luxembourg, including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Luxembourgish research and innovation system and assesses the policy response
The diversification of Luxembourg's economy, which is an overarching objective of its development, is related to fostering the research and innovation system. In view of the economy's heavy reliance on the financial sector, alternative sources of growth with a particular focus on sectors showing a high gross value added potential are needed. Such sectors tend to be technology and knowledge intensive. However, private investment in Research and Development (R&D) remains relatively low in Luxembourg, although progress towards a more diversified, knowledge-intensive economy represents a political priority. Indeed, the fivefold increase of public sector R&D intensity since 2000 (from 0.12% in 2000 to 0.59% in 2014) reflects the authorities' resolve to build up public research capacities, but Luxembourg is not on track to reach its R&D intensity target of 2.3-2.6% of GDP by 2020. R&D intensity was at 1.24% in 2014, a relatively low level compared with the EU average (2.09%). This is due to the sharp drop in business investment from 1.5% of GDP in 2000 to 0.65% in 2014.
Following the 2013 decision of the government to strengthen the country's policy on innovative clusters, two laws reforming some components of the Luxembourg's R&I system were adopted in 2014. The first law aims to consolidate public research organisations, in particular through the merger of the Tudor and Lippmann Public Research Centres. The build-up of public research capacities has not always been based on a sufficiently thorough assessment of the potential for the development of related economic activities in Luxembourg. Nevertheless, the merger of the Tudor and Lippmann Public Research Centres will help to a certain extent to build critical mass in areas with major prospects for cooperation with Luxembourg's industry, such as materials and sustainable development, with some less promising research subjects being discontinued.
The second law aims to reform the National Research Fund, which allocates funds on a competitive basis. The Fund's reform will enable better valorisation of research results, notably through enabling actions to support 'proof-of-concept' and the reform of the Fund's researchers training scheme will foster inter-sectoral (public/private) mobility.
Measures in place to encourage increases in BERD include the Law of 5 June 2009 for private sector research subsidies and the IP Law of 2008. Luxinnovation promotes private sector R&D through the Cluster initiative, Business Meets Research days and identifying other funding opportunities for businesses.
Positive signs in the R&I system development include the reinforcement of the country’s policy on clusters and the reforms of the public research organisations and of the National Research Fund, although their scope is limited. While the initiatives undertaken could provide an opportunity to foster a more coherent development of the research system, it is essential that the initiatives are steered through a governance system that is able fully to integrate the economic dimension and to ensure that research plays the expected role in promoting innovation-led growth.