The Contribution of Basic Research Projects Funded by the Austrian Science Fund to Economic and Societal Impacts

Executive Summary

• The Austrian Science Fund FWF funds basic research projects which do not need to aim at any potential applications or uses outside academia to be funded: Peer review of project proposals is limited to scientific quality, potential economic or societal impacts outside academia do not count towards funding decisions.
• Well in line with international findings however, FWF-funded projects contribute significantly to plenty of such impacts outside academia, whether intended or unintended by the principal investigators leading the projects: they may result from direct follow-on efforts of the investigators themselves to develop uses outside academia, or from others using FWF-funded research results for applications. Impacts arise not just in a distant future, but even in the short-term, from the knowledge and the skills gained by researchers, but also from spending effects linked to the wages of researchers or turnover of start-ups.
• To reach this conclusion, we relied on a comprehensive methodological approach and a variety of data sources which complement each other. We describe both observable applications and uses outside academia, which can be traced directly to FWF's funding ("stories") and use economic modelling and econometric estimations to provide a quantitative dimension ("numbers"). We run our own survey among principal investigators, analyse patent and bibliometric data, conduct case studies and use a variety of databases such as on start-ups.
• We start with the financial return for the taxpayer. Surprisingly, in the most conservative lower-bound estimates, FWF achieves self-financing even in the short-term, based on demand-side or spending effects. This means that all of the € 236 million that the FWF disbursed in Austria in 2022 arrived back in the public finance coffers within roughly a year. As a lower bound, 1€ of FWF funding relates to 1,11 € of tax revenues and social security contributions and 2€ of GDP. This is due to the high wage content of FWF spending in Austria on PhD and post-doc salaries, to revenues achieved or taxes paid by start-ups or their staff, income associated with new or improved products or production processes in established firms as well as researchers trained in FWF-funded research projects that now work in industry. All of this is based on effects in Austria, we do not use FWF-impacts abroad for the modelling. The effects are not causal, but are modelled conservatively.
• Supply-side, or productivity effects come on top of these short-term effects, but are much harder to identify given the available data, FWF's small budget relative to the size of the economy and Austria being a small open economy with large international spillovers. A structural time-series model using Austrian data only indicates that an increase of FWF funding by 10% is associated with an increase of GDP per hour worked (productivity) of 2- 3% over a period of roughly five years on top of the spending effects outlined, petering out after about 10 years. International panel data indicate that 10% more “FWF-type” funding per capita is associated with an increase of 0.2-0.6% of GDP per capita. The estimates of the supply-side effects have to be interpreted cautiously though, they need better data. That such longer-term structural supply-side effects certainly do exist however is well documented by the results of our analysis:
• 8% (24%) of project leaders who responded to our well-balanced survey with a response rate of 35% indicated a (very) high economic (societal) impact; about 33% (58%) indicated a current or potential economic(societal) impact from their FWF-funded research.
• Combining our survey results with FWF's database based on final project reports, as well as with further statistical analysis e.g. of patent databases, we count the following economic impacts to which projects that ended between 2009 and 2022 contributed to: 1.600 researchers now working in industry; 40 licences for others to use research results by FWFfunded projects; 171 patented inventions leading to a total of 861 patents when considering patent applications in several patent offices; close to 150 new or improved production processes or technologies in established firms; about 200 new or improved products (from the survey only; FWF data points to 288 technical products, mostly in software) and approx. 60 start-ups of which 39 are registered as active in the Dealroom database (34 with location in Austria). For two of these categories, patents and start-ups, we can asses not just quantity, but also quality:
• Patents declared as based on FWF-funded research achieve more citations on average as the average of Austrian company patents, driven by a higher share of patents that achieve more than 6 citations, rather than a single outlier. This in line with the international empirical literature that shows that patents based on high quality basic research are – not surprisingly – technologically broader and usually protect inventions which are potentially more far-reaching, relevant for a broader set of follow-on inventions than the average company patent.
• Moreover, about 14% of FWF-funded journal publications published between 2003 and 2021 which can be found in the Lens database were cited by at least one patent, compared with 8% of ERC-funded papers in the timespan 2007-2016, although the share of various scientific disciplines should be taken into account. In total, they receive almost 10.000 patent citations, i.e indicating potential use of the research results for an invention. FWF-funded research is also cited more often by interdisciplinary patents compared to scholarly work from Austrian institutions on average.
• Regarding start-ups, 11 of the 20 prize winners of the Austrian start-up prize Phoenix 2019-2023 across its four categories draw on knowledge gained in FWF-funded research projects (4 won the spin-off prize, 4 the prototype prize, two the start up prize and another one the female entrepreneur prize). Start-ups are also geographically much more localised in Austria than other impacts - about 85% are headquartered in Austria, whereas about 50% of new products or processes are in Austria. This is in line with the literature that observes that start-ups based on frontier research often need the direct involvement of the researchers to be able to commercialise research results, so that start-up location is often close to the original academic research location.
• On average, it took about five years from the beginning of the research to the application, a bit shorter than in international surveys (6-7 years), possibly linked to FWF's high funding share of life sciences, where basic research is closest to applications. Among societal impacts, we rely more heavily on the survey. 46% of researchers indicated a current or potential future contribution to media beyond specialist audiences e.g., general public print media), 25% to cultural heritage (e.g. globally free access to digital conservation projects), 25% to health improvements (e.g. new drugs and therapeutic methods), 18% to environmental improvements (e.g. improved biodiversity, reduced CO2 emissions from cleaner production technology), 9% a change to a regulation (e.g. new norms and standards) and 6% improved security of the population (e.g. improved protection against cyberattacks).
• The case studies can identify the precise impact pathway of FWF-funding from the research activities to the final applications and uses. They include the pathway from research to the archaeological tourism park Elea-Velia and research tools, the Austrian quantum ecosystem with several start-ups (2 of which won a Phoenix prize), the Nobelprize winning Gene scissors (with two papers to which FWF contributed funding that are the most patent-cited among all FWF publications) and the biotech start-up Proxygen.
• Maybe most relevant are the number and quality of start-ups which draw on the knowledge gained in FWF-funded research projects, in line with the international empirical literature that has long been pointing to start-ups as an important way of commercialising frontier research results. Austrian innovation performance has been characterised by successful modernising and technological upgrading of established firms and industries, but by a less dynamic start-up-driven structural change towards more knowledge-intensive activities. If the wider framework conditions for the growth of start-ups can be improved in Austria, in particular the availability of private growth venture capital, FWF funding could become a driver of structural change, of home-grown knowledge-intensive large firms. This would also improve even further the economic return to FWF or other public research funding: to fully reap benefits of any public research investment, the wider framework conditions for producing and doing business in Austria have to be favourable.
• There are limitations to our study: in many cases, FWF-funded research was not the only contributor to an economic or societal impact. As an example, starting up a firm needs more than a knowledge base or trained PhD-researchers, such as equipment or nonresearch staff. Private venture capital or other national public funding sources such as FFG or AWS, or international ones such as the ERC, are sometimes involved.
• At the same time our results are clearly underestimated, as our data are incomplete. E.g., even though the survey worked well, an even higher response rate than 35% would have led to further accounts of impacts. Of those who did answer, 40-50% did not know about the financial revenues attached to the economic impacts. The analysis of patent citations suffers from incomplete acknowledgement of FWF funding in journal publications - 36% of the FWFs 100 top-cited journal publications are not linked with the FWF in the Lens database. Moreover, researchers trained are currently not properly tracked, even though they may the biggest and most sustainable gain for the Austrian economy and society. We only use a rough estimate from the survey. Our results hence certainly underestimate the economic and societal impacts from FWF funding, including our numbers on the financial return to FWF funding, even if accounting for the contribution of other funding sources to the impacts.