Falilou Fall
OECD
OECD Economic Surveys: Austria 2026
Abstract
Growth of the business sector has been sluggish since 2023. Rising labour and energy costs have eroded firms’ price competitiveness, while deeper structural weaknesses persist. Business dynamism has declined since 2006, with slower firm entry and exit, contributing to weak productivity growth and pointing to several challenges, including stronger competition from China. Reviving productivity growth requires a range of measures including lowering administrative burdens and reducing licensing requirements in professional services. Innovation must translate more effectively into market products, supported by risk-friendly financing. Accelerating digitalisation and strengthening competition, including in the energy sector, will be crucial to restore growth and competitiveness.
The Russian war against Ukraine has disrupted the recovery from the pandemic and set off a prolonged slowdown in the business sector and the wider economy (see Chapter 1). Growth of the business sector declined from mid-2022 to the end of 2024 and output was only 1.7% higher in 2023 than in 2019. Business sector labour productivity growth has been weak since the global financial crisis and in recent years with flat productivity in the manufacturing sector since 2019 and a slowdown in productivity growth in the wholesale and retail services sector (Figure 2.1). Weak investment has contributed to modest productivity gains. Rising employment, especially in part-time work, has contributed to dampening productivity growth. On the positive side, output and productivity in the ICT sector have continued to grow rapidly, but these sectors only account for a small share of business sector employment.
Note: Panel A: Labour productivity is defined as the ratio of real value added per hours worked, calculations are detailed here: https://www.oecd.org/sdd/productivity-stats/OECD-Compendium-of-Productivity-Indicators-2023-Methodology.pdf. Manufacturing includes other industry; Wholesale and retail trade includes transport, accommodation and food service activities. Panel B: The OECD aggregate corresponds to the unweighted average of available OECD countries.
Source: OECD Productivity database (2025).
Austrian businesses face a range of short-term and structural challenges. In the short run, rising labour and energy costs have worsened the price competitiveness of Austrian exporting firms. Since 2021, unit labour costs have risen by 24%, among the largest increases in the EU (Figure 2.2). In 2025, electricity prices for non-household consumption were still 60% higher than in the second half of 2021, ranking fifth highest in the European Union. Austria imports 62% of its energy. Electricity prices also closely track fluctuations in natural gas and coal markets. The transition to climate neutrality in emission-intensive sectors poses a major challenge, but also presents opportunities for long-term competitiveness (see Chapter 1).
Note: Panel A: Data frequency is half-yearly and refer to the consumption of KWh- all bands, excluding taxes and levies. Panel B: Data are seasonally but not calendar adjusted.
Source: Eurostat; OECD.
Austria is highly exposed to structural shifts in industry and to growing competition from new players such as China. Austria remains one of the most industrialised EU economies, with industry accounting for around 21% of total value added in 2023, of which manufacturing contributed 17% (Figure 2.3). Machinery and equipment, as well as the automotive sector—both with broad value chain linkages—represent particularly large shares of the economy compared to other countries.
Austria’s industry is specialised and technology-intensive, placing it at the industry frontier but also making it vulnerable to emerging competitors. In recent years, Chinese firms have narrowed the technology gap in key sectors and entered international markets with increasingly advanced products, particularly in technology-intensive industries such as electric vehicles (Bergeaud et al., 2022). This competitive shock from emerging economies affects both the R&D investment and the productivity of domestic firms (Austrian Productivity Board, 2025). While external competition could, in theory, foster domestic productivity through the so-called “escape-competition effect,” evidence points to a different pattern. The rapid technological catch-up of Chinese firms has reduced incentives for ambitious, high-risk R&D among European competitors. As returns on innovation have declined, firms have shifted from technological exploration toward exploitation (Morandi Stagni et al., 2021). Friesenbichler et al. (2023) show, that while European firms initially managed to withstand Chinese competition by improving intra-firm productivity, the longer-term effect has turned negative, leading to productivity declines.
To manage these transitions, Austrian businesses will need to adapt, reallocate resources from declining to expanding activities and firms will need to reinforce their innovation base and adopt new technologies—particularly artificial intelligence—to remain competitive, raise productivity and expand activity and employment. This will require a stronger innovation system and an increase in investment in intangible capital (Friesenbichler and Kuegler, 2025).
Section 2 of this Chapter discusses the dynamism of the Austrian business sector. Section 3 analyses the vulnerabilities linked to the sourcing of inputs in a context of higher trade restrictions. Policies to boost innovation and digitalisation are presented in section 4. Finally, section 5 assesses policies to reducing regulatory burden and enhancing competition.
Percentage, 2024
Note: Panel A: Data correspond to gross value added and income for the following industry sectors (NACE Rev.2): Industry (except construction) [B-E], Manufacturing [C], Manufacture of machinery and equipment n.e.c. [C28], and Manufacture of motor vehicles, trailers, semi-trailers and of other transport equipment [C29_C30] corresponding to Automotive. Data for Manufacture of machinery & equipment and Automotive for Germany and Poland refer to 2023.
Source: Eurostat.
Business dynamism is the process of the exit of low productive firms, the entry of new ones and the growth of young and dynamic firms in competitive markets that incentivise investment and innovation. This drives productivity within firms and the reallocation of resources to the most successful firms and away from declining activities (see Box 2.1). If incumbent firms are less challenged by new market entries, they have lower incentives to innovate, upgrade their management skills, invest in adopting new technologies and improve productivity, particularly in high-technology sectors. Moreover, new firm entries have been found to significantly contribute to innovation, structural change and productivity growth (Gourio et al., 2016).
The OECD DynEmp project, led by the Directorate for Science, Technology and Innovation, offers a granular view of employment and business dynamics across countries over the past two decades. It compiles harmonised, granular data from administrative sources such as business registers and social security records to analyse firm demographics and employment growth. A common computer code, developed by the OECD, ensures consistent statistical treatment of the data across countries. National partners run the code on their data and return the results to the OECD, where they are validated and used to support policy analysis.
DynEmp indicators for Austria are based on the WIFO INDI-DV dataset based on AMDB of AMS Österreich (Austrian Labour Market Service) and BMAW (Federal Ministry for Labour and Economy). The statistical unit in the microdata refers to social security ID (companies can have several numbers). The contribution of Werner Hölzl (Senior Economist at WIFO, Austrian Institute of Economic Research) as the main contact for the DynEmp project is gratefully acknowledged.
The results presented in this chapter are based on the DynEmp3 database (September 2025) and cover the period 2004–2022. The analysis includes Austria, Belgium, Finland, France, Germany, Hungary, Italy, Portugal, Slovenia, Spain and the United Kingdom (unbalanced panel), focusing on manufacturing (ISIC Rev. 4, section C) and non-financial market services (sections G–N excluding K).
Source: Desnoyers-James, Green, Reinhard and Verlhac (forthcoming 2026) for more details on the data sources and methodology.
Austria’s business dynamism has been in decline for many years as in many other OECD countries. Although entry and exit rates remain relatively high compared with many OECD countries, the pace of firm creation and destruction has slowed since 2006. In 2006, the entry rate in the manufacturing sector was at around 6.3% and at around 10.7% in the non-financial services sector. While entry and exit rates have been fairly stable in manufacturing, they have fallen significantly in services—the largest sector of the economy. Over the past two decades, Austria’s entry rate declined by 2 percentage points, and the share of new businesses among incumbents fell by 4 percentage points, somewhat worse than an OECD benchmark (Figure 2.4). The weakening of business dynamics in services suggests the presence of important barriers to firm entry and growth, including administrative burdens, regulatory obstacles to competition, market power and anti-competitive practices by incumbents, as well as limited access to finance for new firms (Calvino, Criscuolo and Verlhac, 2020). Rapid population ageing has also weighed on entrepreneurial activity and reduced entry rates (Austrian Productivity Board, 2024).
Firm exit rates have been declining in Austria over the past two decades from around 10% in 2006 and firm exit has slowed substantially more than firm entry and the OECD benchmark. In contrast to benchmark countries, where exit rates rose until the COVID-19 pandemic, Austria’s exit rates fell by nearly 2 percentage points (Figure 2.5). While lower exit rates may reflect stability, they can also reflect weak capital reallocation with less productive firms remaining in the market and retaining resources that could otherwise be used more efficiently. Job reallocation has also slowed, signalling reduced worker mobility. The limited dynamism of the labour market is further evidenced by low post-entry employment growth among new firms and a comparatively small share of surviving micro-entrant firms that expand to more than nine employees within three years (Desnoyers-James et al., 2025).
All sectors, percentage points
Note: Data cover manufacturing (ISIC rev. 4 section C) and non-financial market services (or “services”, sections G-N excluding K) and focus on the business population of firms with two or more persons engaged. Benchmark includes Austria, Belgium, Finland, France, Germany, Hungary, Italy, Portugal, Slovenia, Spain and the United Kingdom countries (unbalanced sample). Panel A: This figure reports the evolution of entry rates focusing on cumulative changes within SNA A38 industries weighted by the sector share in the number of units. Each point represents cumulative change in percentage points since 2006. The cumulative change is computed based on the regression of entry rates on year dummies within country-industry. Panel B: This figure reports the evolution of the share of new firms in the business population, focusing on cumulative changes within SNA A38 industries weighted by the sector share in the number of units. Each point represents cumulative change in percentage points since 2006, computed regressing entry rates on year dummies within country-industry. New firms correspond to firms aged 1-2 years (excluding entrants).
Source: DynEmp3_v3 database, September 2025. Desnoyers-James, Green, Reinhard and Verlhac (forthcoming 2026).
All sectors, percentage points
Note: Benchmark includes Austria, Belgium, Finland, France, Germany, Hungary, Italy, Portugal, Slovenia, Spain and the United Kingdom countries (unbalanced sample). Panel B: Job reallocation measures the simultaneous creation and destruction of jobs within an industry, accounting for the fact within an industry some firms shrink or exit, while others expand or enter. Job reallocation is the sum of job flows (job creation and destruction) in an industry (between t-1 and t) divided by average employment of the industry in t-1 and t. Excess reallocation is the job reallocation rate of an industry minus the absolute value of net employment growth. Excess reallocation represents that part of job reallocation over and above the amount required to accommodate the net employment change.
Source: DynEmp3_v3 database, September 2025. Desnoyers-James, Green, Reinhard and Verlhac (forthcoming 2026).
Decomposing the growth of multifactor productivity (MFP) into the direct contributions of new firm entry, the average growth of incumbent firms, the reallocation of economic activity among them, and firm exits helps explain how business dynamism has driven productivity growth in Austria. On average, new entrants made a positive contribution to annual MFP growth in non-financial market services (Peneder and Unterlass, 2024). However, the impact of these new firms on productivity tends to decline over a 3- to 5-year horizon, suggesting they face barriers to scaling up and thriving (Figure 2.6). In contrast, the average MFP growth of incumbents increases over longer time intervals (Peneder and Unterlass, 2024). The reallocation of production among incumbents grows even more strongly over time, indicating that more competitive firms attract more productive resources.
Medium to long-run challenges related to energy prices and energy vulnerabilities, higher competition from new contenders, innovation and digitalisation gaps, and trade risks will likely require a faster pace of reallocation between firms and sectors than in the past (Hoelzl et al., 2025). The slowing of business dynamism is therefore a concern, and reforms are needed to remove obstacles to the reallocation of capital and foster stronger competition and innovation.
Efficient insolvency frameworks foster business dynamism and productivity by enabling the timely restructuring or exit of non-viable firms. In Austria, the share of such low-productivity “zombie” firms—those that continue operating despite weak performance—declined before the pandemic and remains low by international standards (OECD, 2024). However, the OECD Insolvency Indicator shows that Austria’s framework could be further strengthened to support resource reallocation and productivity growth (André, 2022).
Austria implemented Directive (EU) 2019/1023 through the Restructuring Regulation Act in July 2021, introducing a formal pre-insolvency restructuring option. However, uptake has been negligible—only five proceedings have occurred to date. Reorganisation plans under insolvency law and out-of-court restructurings remain the preferred tools. About one-fifth of insolvency cases end with a reorganisation plan, which sets a minimum repayment of 20–30% of the debt if approved by creditors. The process is fast, typically completed within four months, and flexible for both debtors and creditors. Out-of-court restructurings are even more common and reportedly succeed in 70% of cases (Mayr et al., 2023), thanks to their flexibility and creditor coordination. Still, the 2021 regulation could prove useful for large firms with complex creditor structures if awareness and incentives improve. Simplifying procedures and encouraging earlier restructuring could strengthen Austria’s corporate resilience and make the system more efficient.
Share of entrants (2–9 workers at entry) reaching 10+ workers after 3 or 5 years
Note: This figure shows the share of surviving entrants (firms with 2–9 workers at entry) that grow to 10+ workers three or five years later. The share is calculated among firms still active in the target population at the horizon, excluding exits, those without reported employment, and (for the three-year period) those with fewer than two workers. Entry is defined as the reported start year if it predates the sample period; otherwise, as the first year with positive employment. Data are averages for the 2016, 2017 and 2019 entry cohorts (2016 and 2017 for the five-year measure) and cover manufacturing and non-financial market services (ISIC Rev. 4 sections C and G–N, excluding K).
Source: DynEmp3_v3 database, September 2025. Desnoyers-James, Green, Reinhard and Verlhac (forthcoming 2026).
As a small open economy with few natural resources, the Austrian economy is dependent on imported fossil fuels for energy and on specialised imported intermediate goods. As global trade restrictions are growing, including for strategic inputs as chips and rare earths, securing the sourcing of key inputs for the industry and the economy is crucial.
Fossil fuels still dominate Austria’s energy mix, particularly in transport and industry. These sectors account for over 60% of emissions, with transport alone up 57% since 1990. Continued reliance on oil and gas undermines both climate goals and energy security, leaving Austria off track for its emission reduction targets. Industry accounts for over 20% of Austria’s emissions, mainly from steelmaking. Voestalpine alone generates 15% of national CO₂ emissions, relying on coal-based blast furnaces. The firm plans to replace all blast furnaces with electric arc furnaces by 2050, cutting emissions by 50% by 2030 and achieving climate neutrality by mid-century. Supporting this transition through low-carbon electricity and hydrogen will be crucial. Stronger long-term policy signals and financial support for breakthrough technologies are needed. Austria’s H2Future and HYFOR pilot projects show the potential of hydrogen-based steelmaking, and the new Hy4Smelt project will help scale up these innovations. Renewable gases—notably biogas and green hydrogen—can replace fossil fuels in hard-to-abate sectors. A new EUR 400 million hydrogen support scheme, launched for consultation in 2024, and plans to secure hydrogen imports from the MENA region are important steps. Supporting renewable gas deployment will help maintain industrial output while progressing toward climate neutrality.
Austria is highly integrated into regional and global value chains. The COVID-19 pandemic exposed vulnerabilities in these networks, as disruptions led to shortages of critical goods such as respirators and semiconductors (Schwellnus et al., 2023). Economies, particularly industries, including in Austria, face systemic risks from the globalization of supply chains. Private businesses often fail to account for these risks because they focus only on their own operations and lack visibility beyond their first-tier suppliers, which causes them to underestimate vulnerabilities (Schwellnus et al., 2023). Figure 2.7 shows the geographical origins of these vulnerable intermediate products. Each bar represents the share of all vulnerable products sourced from the top three suppliers. Austria sources nearly 53% of its vulnerable intermediate products from just three countries. Foreign supply shocks can have particularly severe effects on domestic production when supplier concentration—both by country and by firm—is high (Schwellnus et al., 2023). Of the 250 imported products classified as moderately vulnerable and around 50 considered highly vulnerable and around 8% of Austria’s intermediate inputs are highly or moderately vulnerable (Berthou et al., 2024). Although this small share could suggest low exposure to supply chain shocks, the real vulnerability depends on how easily firms can switch suppliers. Many studies show that substitution elasticities can be very low for these products in the short run, making it difficult to find alternative suppliers quickly (Bachmann et al., 2022; Baqaee et al., 2022). When substitution is limited, a shock affecting one supplier can severely disrupt downstream production.
Public policies can strengthen value chain resilience by helping firms recover quickly after shocks and by reducing exposure to risks. Raising awareness among firms in vulnerable sectors can improve their readiness and resilience. Well-targeted government support—such as grants, loan guarantees, and aid for workers—has proven effective after disruptions. Building management and worker skills is crucial to enable fast restructuring. To mitigate risks, Austria can promote diversification and reduce technological dependencies. Diversifying suppliers can significantly soften the impact of supply shocks (Schwellnus et al., 2023). Technological innovation that reduces reliance on specific inputs, such as fossil fuels, can provide similar protection but often requires time to implement. Encouraging firms to monitor vulnerabilities, diversify sourcing, and lower dependence on critical technologies will help protect key industries and their downstream partners. Establishing an informal observatory that meets twice a year with representatives of key business stakeholders to monitor tensions in the sourcing of critical materials and their underlying causes would raise awareness among participants and help inform policy responses. Austria should implement the EU Critical Raw Materials Act that aims to secure the supply of critical raw materials (Box 2.2). The EU Critical Raw Materials Act facilitates shorter permitting processes for rare earths, such as lithium, and envisages joint purchases, stockpiling and import diversification of rare earths. The EU Security Strategy also supports risk assessments related to the resilience of supply chains, critical infrastructure, technology leakage and economic coercion. The Austrian circular economy strategy should be updated to include raw materials and strategic minerals. Austria should promote the use of circular material and research in recycling or substituting of critical raw materials as it is lagging OECD countries in these areas.
Despite recent progress, EU financial, goods and services markets remain significantly fragmented and lack competitiveness, missing out on potential economies of scale and efficiency gains. Deepening the integration of the EU market would remove barriers and unlock the full potential of the EU single market (Draghi, 2024). Market integration of services in EU is also limited. The 2025 OECD Economic Survey of the EU-EA provides recommendations to deepen the integration of goods and services market of the EU, in particular, by reducing the regulatory burden, removing internal barriers in trade and easing entry in professional sevices.
Share of vulnerable products by supplier rank, 2019
Note: Products are categorised based on their vulnerability using two key indicators: Global export market shares concentration (HHI-MSX) and suppliers' concentration (HHI-M). A product is deemed to be "highly vulnerable" if both the HHI-MSX and HHI-M exceed 0.5. Conversely, a product is considered "moderately vulnerable" if both indicators are above 0.3 but below 0.5. Vulnerable products have their imports exceeding the imports of the same product in each country.
Source: Comtrade data, calculation by A. Haramboure and L. Samek, (see Berthou, Haramboure and Samek, 2024).
The EU Critical Raw Materials Act (CRMA), adopted in 2023, aims to secure a sustainable and resilient supply of critical raw materials essential for Europe’s green and digital transitions and long-term strategic autonomy. It combines internal measures to strengthen domestic capacity with external partnerships to diversify supply sources.
The CRMA sets 2030 benchmarks for strategic raw materials: at least 10% of annual consumption to be extracted, 40% processed, and 15% recycled within the EU. It promotes strategic projects in extraction, processing, and recycling through faster permitting and improved financing, both in the EU and partner countries such as Chile, Canada, and Namibia.
To improve resilience, the Act establishes a European Critical Raw Materials Board to monitor markets, conduct supply-chain stress tests, and coordinate strategic stockpiles. It also supports a Critical Raw Materials Club to strengthen global cooperation and enhance free trade in key inputs.
Finally, the CRMA promotes a circular materials economy by encouraging recycling, reuse, and waste recovery, notably for permanent magnets, through national programmes and incentives such as deposit-refund or reward schemes.
Source: European Commission, ‘Establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations’ (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020, 2023; Dechezleprêtre, A. et al. (2024), “A comprehensive overview of the renewable energy industrial ecosystem”, OECD Science, Technology and Industry Working Papers, No. 2024/11, OECD Publishing, Paris, https://doi.org/10.1787/94dce592-en.
Advances in new technologies and business practices, including production processes, are crucial drivers of productivity growth (OECD, 2024b; Baily, 2023). Innovation is essential for the ability of Austria’s manufacturing industries, including the automotive industry, to withstand rising competition from new market entrants. Advanced digital technologies can speed up the shift toward more knowledge-intensive services and raise overall productivity. They enable process automation, the creation of new business models, and access to global markets. Expanding the use of digital technologies requires high-performance digital infrastructure and a skilled workforce.
2.3.1. Innovation is key for diversification and competitiveness
Austria benefits from a strong innovation ecosystem: R&D and innovation spending reached 3.3% of GDP in 2024, exceeding the EU’s 3% target and ranking among the highest internationally (Figure 2.8). About one-third of this spending is financed by federal and regional governments and 42% by enterprises (Austria Research and Technology Report, 2025). Public support includes direct funding, such as through the Austrian Research Promotion Agency’s (FFG) General Programme, as well as tax incentives like the research premium—a tax credit reimbursing 14% of firms’ total research expenditures. In financial terms, tax measures represent the bulk of government support (Figure 2.8, Panel B).
Strong and well-financed higher education institutions play a key role in driving R&D and innovation. Government expenditure on tertiary education is comparatively high and provides strong incentives for collaboration with businesses. Long-term science–industry cooperation in Austria is supported through several key programmes: the COMET Competence Centre Programme, which funds research centres and networks linking science and industry; the Christian Doppler Research Association, which supports industry-oriented fundamental research at universities; and the BRIDGE Programme, which finances application-oriented basic research in small consortia. Austria ranks among the top EU countries in university–business and international research collaboration (European Innovation Scoreboard, 2025). Moreover, a large share of Austrian firms with at least 10 employees engages in innovation activities (Figure 2.9). Overall, Austria is classified as a strong innovator within the EU. However, its performance has slowed in recent years and continues to lag innovation leaders, such as Sweden, Denmark, and the Netherlands (Figure 2.9).
As % of GDP, 2023 or latest available year
Note: The OECD aggregate corresponds to the unweighted average of available OECD countries. Panel A: Government, higher education and private non-profit sectors are summed together. Panel B: The EU corresponds to the composition of European Union as of 2020. The OECD average does not include data from indirect government support through subnational R&D tax incentives. Tax incentives include tax income support and subnational tax support, available only for Canada, Hungary and Japan.
Source: OECD R&D Expenditure (database); OECD R&D Tax Expenditure (database); Business Innovation Statistics and Indicators; EU European Innovation Scoreboard.
Despite an overall favourable environment, Austria’s innovation policy could be strengthened in terms of new product and their trade impacts, as well as support for business financing. Austria ranks highly in design and patent applications. However, the transformation of these outputs into new-to-market and new-to-firm innovations is among the lowest in the EU (European Innovation Scoreboard, 2025). Risk aversion given economic uncertainty and financing barriers are among explanations for this weak conversion of research into market-ready products (Austrian Council for Sciences, Technology, and Innovation, 2025). Policies that help mitigate the risks associated with developing and introducing new products—particularly through financial incentives—have a crucial role to play.
Note: Panel A: Innovation-active firms cover firms with innovation activities that have not necessarily led to an innovation. Panel B: The Summary Innovation Index is a composite indicator of 32 indicators in 12 innovation dimensions across four types of activities: framework conditions, investments, innovation activities and impacts. Each score is indexed to the performance of the EU in 2018, regardless of the comparison year selected.
Source: OECD R&D Expenditure (database); OECD R&D Tax Expenditure (database); Business Innovation Statistics and Indicators; EU European Innovation Scoreboard.
Expanding access to financing for innovative firms, not only for start-ups and SMEs but also for larger companies, is essential to sustain Austria’s broad industrial and manufacturing base. The financing structure of Austrian firms, particularly SMEs, is not conducive to risk-taking (Figure 2.10). Debt financing remains the dominant instrument, with SMEs’ stock of loans amounting to 20% of GDP—among the highest in the OECD (OECD, 2025). By contrast, access to equity financing remains limited: venture capital investment stood at just 0.02% of GDP in 2024, well below the EU average of 0.06%. OECD research confirms that greater availability of venture capital would significantly enhance the productivity of Austrian companies (Sorbe et al., 2019).
The government has launched reforms aimed at improving equity access and financing for firms, particularly SMEs. The new Flexible Capital Company (“Flexible Kapitalgesellschaft – FlexKap”), introduced on 1 January 2024, provides start-ups and innovative SMEs with a tailored legal form. It enables flexible capital measures permitting to easily modify the distribution of capital shares, simplifies the transfer of company shares to individuals or other entities, and allows non-voting shares for employee participation. By the end of 2024, around 800 FlexCos had been founded (Ministry of Economy, 2025). In addition, the amendment to the GmbH Act reduced the minimum share capital for this legal form from EUR 35,000 to EUR 10,000. The Start-Up Promotion Act (“Start-Up-Fördergesetz”) further supports financing by allowing tax deferral for employee shareholdings until shares are sold, alongside a simplified and more favourable flat-rate regulation. These measures facilitate equity sales and investment, opening new channels for innovation financing. Promoting these instruments more actively and raising awareness of their advantages could help increase uptake.
2023
Note: SMEs are firms with turnover below €50 million: small firms have turnover below €10 million, medium-sized firms between €10 million and €50 million, and large firms above €50 million. Panel A: “Other sectors” includes corporate bonds, trade payables, rest, and other creditors. Other creditors comprise intra-group debt and accounts payable (excluding trade payables and payables to other financial creditors), mainly tax and social security liabilities, staff payables, and dividends payable. Rest includes advance payments on orders and deferred liabilities. Panel B: For Portugal, data for small, medium-sized, and SME firms refer to 2022; data for large firms are unavailable.
Source: Bank for the Accounts of Companies Harmonized (BACH) database.
Strengthening venture capital financing is also essential. The authorities stimulate venture and growth capital through public subsidies and several initiatives. The public sector provides most of venture capital funding in Austria (OECD, 2021). The lack of private venture and growth capital impedes the development of an equity eco-system. In 2023, a new state-financed venture capital fund (aws Gründungsfonds II: “Startup Fund”) was established with a 10-year duration and EUR 72 million in capital to invest in young, innovative start-ups and growth firms based in Austria. The fund aims to leverage up to EUR 500 million in private investment. In addition, the government intends to create a fund of funds to pool private capital with public funds to support start-ups and scale-ups through their growth phases. However, the scale of public financing remains limited. Diversifying the instruments and intervention modalities of the fund would enable it to support a larger number of firms, taking example from experience of countries as Israel (Box 2.3). Austria could further mobilise domestic and European savings for venture capital by promoting funds of funds, drawing on experiences in other European countries. Germany’s Wachstumsfonds Deutschland, launched in 2021 as part of the Zukunftsfonds, illustrates how public anchor investments—combined with substantial participation by institutional investors such as insurers, pension funds, asset managers, and family offices—can strengthen the venture capital ecosystem in a manner consistent with EU state aid rules. For Austria, a similar approach, potentially in partnership with pan-European initiatives, could help overcome scale constraints in the domestic venture capital market. Public financial institutions, including the European Investment Fund, can play a catalytic role in supporting Austria’s venture capital market, provided such initiatives are carefully designed to limit fiscal risks and primarily crowd in private-sector financing. Public venture capital should aim at attracting more involvement of private institutions supporting venture capital.
Attractive exit options are important for encouraging entrepreneurship and startup creation. Many founders are motivated by the possibility of selling their company once it has grown and matured, for example through a stock market listing (Initial Public Offerings, IPO) or a sale to another company via a merger or acquisition. Such exits can provide significant rewards for founders and early investors and help recycle capital and experience into new startups. In Austria, however, exit opportunities remain limited. IPO and merger and acquisition activity is relatively low compared with the United States, the United Kingdom, and the euro area. In particular, IPO activity in Austria is very small as a lack of scale reduces investor interest and market liquidity, further constraining exit options for growing firms. The harmonisation of securities market regulation and supervision across the euro area will make European securities and IPO markets more efficient and better able to leverage economies of scale, including by fostering consolidation of exchanges. The deepening of the integration of the EU capital market would remove barriers and unlock the full potential of the EU single market for financial services (OECD, 2025b). Simplified access to capital markets reduces costs and makes the markets more appealing for investors and companies across all Member States, irrespective of size.
Israel hosts one of the strongest venture capital markets in the OECD, bolstered by significant foreign investor participation. Venture capital (VC) activity declined after the 2008 Global Financial Crisis, rebounded between 2014–2018 (averaging 1% of GDP), and reached 1.7% in 2021. Most investments targeted start-up and late-stage firms, while seed-stage funding remained limited (0.02% of GDP).
Cybersecurity and fintech dominate (69% of VC investments), followed by Internet of Things (IoT), food-tech, and automotive. Foreign investors, mainly from the United States, contributed about 71% of total high-tech VC funding (2015–2023), peaking at USD 12.2 billion in 2021.
The Israeli government played a foundational role in developing the VC industry through the Yozma Fund (1993), a public–private fund-of-funds model that successfully attracted foreign partners and nurtured local VC capabilities. Initially, the government retained 40% of the fund but by the early 2000s, Israel’s VC sector was fully privatised, with no direct government participation for over two decades.
Between 2000 and 2020, public support shifted to indirect innovation programmes managed by the Israel Innovation Authority (IIA), such as Tnufa (Ideation) and Seed grants, which promoted early-stage entrepreneurship and ecosystem development.
In 2024, facing a slowdown in VC activity, reliance on foreign capital, and reduced start-up formation, the government launched a new stimulus package introducing three flagship initiatives: Yozma 2.0 Fund – A renewed fund-of-funds model to boost local capital participation, leveraging around USD 4 billion through public–private co-investments (0.3 government to 1 institutional dollar ratio); Start-up Fund – Annual NIS 500 million grant scheme supporting pre-seed to Series A rounds, co-financed with private investors; and the New Venture Creation Incubators’ Fund – Up to NIS 40 million (about USD 10 million) over 5 years for entities, including foreign ones, to establish deep-tech incubators.
The Israel Innovation Authority’s annual budget is about 1.5% of Israel’s total R&D spending, with two-thirds directed to company-level support and one-third to R&D infrastructure such as incubators and accelerators.
Source: OECD (2025) “Benchmarking government support for venture capital – COUNTRY NOTES: ISRAEL © OECD 2025 https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/06/benchmarking-government-support-for-venture-capital-country-notes_2cacbf3f/israel_e79663e4/b5c8cc2e-en.pdf
To harness new technologies and to develop new high-value activities building on existing strengths, an industrial strategy could help coordinate across different instruments, develop clusters based on innovation and skills, and mobilise the necessary resources and address relevant policy barriers. This might include a sectoral focus and be tied to regional strategies. Austria recently published a comprehensive Industrial Strategy for 2035 (Box 2.4) focussing on 9 priority areas and including a range of structural reforms and some direct support measures, including energy price subsidies. Some other countries have taken a similar approach, such as the United Kingdom. Many OECD countries engage in some forms of industrial support, although historically, experience has been mixed, and it is important to have clear objectives and to evaluate policies (OECD, 2025c). Implementing comprehensive policies encompassing energy and price competitiveness, strategic sourcing of inputs, R&D and innovation, positioning the industrial sector to benefit from the development of artificial intelligence and face new competitors in key sectors, would help to ensure a better alignment of existing sector policies (Box 2.4).
Austria released in January 2026 an Industrial Strategy for 2035 setting out a long-term vision to strengthen Austria as a leading industrial and innovation hub in Europe. The overarching ambition is for Austria to become one of the world’s top 10 most competitive economies by 2035, while ensuring resilience, sustainability, and high-quality jobs.
The strategy prioritises seven policy areas:
Research, technology and innovation
Energy and competitive electricity prices
Education and labour market reforms
Circular economy and bioeconomy transformation
Infrastructure, mobility and economic resilience
Europe and geopolitical challenges
Administrative burden reduction and improved financing conditions
The most prominent initiatives include:
A Frontier Technology initiative targeting nine strategic technologies (AI and data innovation, chips and semiconductors, advanced production technologies and robotics, quantum technologies and photonics, advanced materials, life sciences and biotech, energy and environmental technologies, mobility, aerospace).
Around €2.6 billion in funding allocated through the RTI Pact until 2029.
Introduction of an industrial electricity price from 2027 to support energy-intensive sectors.
Expansion of hydrogen infrastructure and lifting the ban on carbon capture storage (CCS).
A major administrative burden reduction programme and “one-stop shops” for firms.
Measures to secure skilled labour, including new apprenticeships linked to key technologies.
Source: Ministry of Innovation, Mobility and Infrastructure, https://www.bmimi.gv.at/dam/jcr:770030c8-ded5-4ac3-8912-8651ff4ee415/260121_Industriestrategie_2035_final.pdf.
2.3.2. Expanding digital enablers and fostering the digitalisation of businesses
The spread of digital technologies can significantly boost productivity growth. Digital-intensive sectors are more dynamic, with higher average entry rates and more job reallocation among incumbent firms (Calvino and Criscuolo, 2019). Broad adoption of AI has the potential to deliver major long-term productivity gains (Filippucci et al., 2024), although impacts vary (Acemoglu, 2024). Firms that adopt AI tend to be more productive, as the highest rates of AI use are found among top performers within sectors (OECD, 2024c). Complementary assets and skills play a crucial role in translating AI adoption into productivity growth. More digital and competitive firms are more likely to adopt AI, underscoring the importance of skills, infrastructure, and digital capabilities (Noy and Zhang, 2023).
Broadband coverage in Austria has improved, but only 30% of households have internet speeds above 100 Mbps (Figure 2.11). While very high-capacity and 5G networks have expanded rapidly, rural and mountainous regions are lagging due to high deployment costs and low population density. The Broadband Austria 2030 strategy, part of the EU supported Austrian Recovery and Resilience Plan, aims to close these gaps through EUR 1.4 billion in public funding and incentives for private investment, including new state-owned fibre networks in several Länder. However, regulatory barriers—notably complex, decentralised permitting—still slow deployment, and local resistance to 5G base stations persists. Streamlining infrastructure rules and promoting adoption campaigns would accelerate rollout and help scale up digital services nationwide.
Austria is slow in the adoption of digital technologies and AI due to shortages in advanced digital skills. Using digital technologies effectively requires strong and continuously updated skills. About 65% of Austrians aged 16–74 have basic digital skills, but advanced skills—such as programming and AI—remain below levels in leading countries like Denmark and the Netherlands (Figure 2.11, Panel B).
Automation and AI are transforming jobs, especially those involving routine, lower-skilled tasks, which face the highest automation risk (Georgieff & Milanez, 2021). While low-educated workers are most exposed, only 18–27% of tasks are fully automatable, implying that most jobs will evolve rather than vanish. Demand is rising for advanced cognitive and organisational skills to complement AI-driven change.
2023
Note: The EU corresponds to the composition of European Union as of 2020.
Source: European Commission, Digital Decade DESI visualisation tool.
Austria has launched comprehensive strategies to strengthen digital skills among students and workers. The Digital Austria 2050 Strategic Action Plan, established in 2020, set the framework for key digitisation initiatives across society and the economy. In 2021, the government published the 2030 Artificial Intelligence Mission Austria (AIM AT 2030), outlining the country’s contribution to the EU’s target of 75% of enterprises using Cloud Services or AI or Data Analytics. This strategy includes plans to integrate AI into education, boost technology transfer, and finance innovation across the full cycle.
Austria has introduced several policies to strengthen digital skills. Since the 2022/2023 school year, all students in grades 5 to 8 must take a compulsory digital basic education subject covering media literacy, information processing, personal data management, and data protection. In 2023, the Digitale Kompetenzoffensive (DKO) initiative was launched to provide quality-assured training in basic digital skills across different areas—ICT specialists, education, citizens, businesses, and the public sector. The goal is to teach everyone digital skills based on the Austrian competence model DigComp 2.3 AT, which defines six competence areas and 27 individual skills across eight proficiency levels. Fully implementing and expanding access to these programmes will strengthen Austria’s foundation for a digital society and help workers stay resilient in the face of digital disruption. Further developing the integration of digital skills in VET programmes would prepare more workers to the digitalisation of the economy. The modernisation of apprenticeships programme by introducing digital elements or the development of new programmes like “Application Development Coding” will contribute to expanding digital skills.
Digitalisation is reshaping labour demand by driving up the need for ICT specialists, especially software engineers. Shortage of ICT professionals and hiring difficulties remain a major barrier to digitalisation (Figure 2.12). While Austria is improving, it still lags leading countries in the share of ICT graduates (5.3% compared to 9% in Estonia and Luxembourg) (European Commission, DESI, 2024). Continuing efforts to increase the share of the population with advanced digital skills and the number of ICT and STEM graduates is warranted. The new digital university set up in Linz in 2023/2024 has the potential to boost skills to support digitalisation. Austria can further grow the pool of digital experts by accelerating programmes in ICT, AI, and cybersecurity and by boosting funding for specialised training and apprenticeships. Fostering the integration of digital and green skills into newly developed and modernised training regulations will be essential.
Businesses in Austria are becoming increasingly digitalised, using ICT and AI in management, production, and sales. E-commerce has grown, with 30% of all firms and over 50% of large companies selling via digital platforms or websites (Figure 2.13, Panel A). Digital intensity is rising, with nearly 60% of SMEs achieving at least a basic level, placing Austria at the EU average, but still below the 90% EU target (Figure 2.13, Panel B). Most enterprises (around 70%) have not considered using AI technologies for their businesses. Adoption remains limited in manufacturing, production, and parts of the services sector. Only 18% of small firms with fewer than 50 employees currently use AI technologies (Figure 2.14). Several factors explain this underuse. Even among ICT firms and large companies (over 250 employees), about 40% had not considered adopting AI technologies in 2024 (Statistics Austria, 2025). Among those that did, the main barriers were lack of internal expertise, legal uncertainties, and complex data requirements. Improving access to and awareness of initiatives like the Ö-Cloud-Initiative, Gaia-X-Hub AT, Digital Innovation Hubs, and European Digital Innovation Hubs will help boost adoption.
Enterprises with difficult-to-fill vacancies for ICT specialists, %, 2023
Note: ICT specialists are employees whose main job is in information and communication technology (ICT). Responsibilities include the design, development, implementation, programming, operation, evaluation, administration and maintenance of ICT systems or applications. The ICT sector includes the following industries (ÖNACE 2008): 26.1–26.4, 26.8, 46.5, 58.2, 61, 62, 63.1 and 95.1. Data refer to February - July 2024 data collection.
Source: Statistics Austria, Survey on ICT usage in enterprises 2024.
Percentage of enterprises, 2024
Note: Panel A: E-Commerce sales are sales via websites, apps, online marketplaces or EDI-based systems (e.g. XML, EDIFACT). Panel B: SME refers to small and medium enterprises (10-249 persons employed) without financial sector. Panel A & D: All enterprises include firms with 10 persons employed or more. The ICT sector includes the following industries (ÖNACE 2008): 26.1–26.4, 26.8, 46.5, 58.2, 61, 62, 63.1 and 95.1. Data collection refers to February to July 2025 – Reference period: 2024. Panel B & C: The EU corresponds to the composition of European Union as of 2020.
Source: European Commission, Digital Decade DESI visualisation tool and Statistics Austria, Survey on ICT usage in enterprises 2025.
Austria has developed strong digital strategies and action plans, including the Digital Act, the National Strategic Roadmap for the Austrian Digital Decade, and programmes targeting SME digitalisation. For example, under the aws digitization programme, businesses investing in digitalising their products/services, processes, or e-commerce activities can receive an investment premium. Non-refundable grants up to EUR 150,000 can be received. Austria should scale up and extend this programme until it meets national and EU digital targets. KMU.DIGITAL offers advisory services and implementation support for digital projects. KMU.DIGITAL helps SMEs plan, design, and implement digital projects by funding analysis, consulting, and external services. The programme could better target SMEs that have not yet considered digital technologies. After a positive evaluation of the first phase, Austria extended KMU.DIGITAL for 2024-2026 with a budget of about EUR 35 million. Expanding its reach and aligning funding with demand will be essential to accelerate SME digitalisation.
Note: AI-based technologies refer to technologies that imitate intelligent behaviour and have a degree of autonomy to perform specific tasks. Data refer to February to July 2024 data collection. Panel C & D: Data requirements category refers to difficulties with availability or quality of the necessary data. Incompatibility category refers to incompatibility with existing equipment, software or systems.
Source: Statistics Austria, Survey on ICT usage in enterprises 2024.
Austria has made progress in reducing general administrative burdens. The “Once-only” reform, which requires businesses to report certain data only to be entered once instead of submitted to multiple authorities, is a positive step. The Grace Period Act also improves legal and planning certainty for family business transfers by easing regulations. However, Austria should go further by systematically reviewing reporting obligations to remove unnecessary or duplicative requirements. Streamlining procedures, introducing silence-is-consent rules, setting clear maximum time limits for low-risk authorisations, and fully digitalising permit applications would further reduce red tape and support business dynamism. Integrating competition assessments into regulatory reviews would further limit regulatory burden. Austria could consider making use of regulatory experimentation mechanisms (such as regulatory sandboxes) for emerging technologies to reduce frictions for innovative firms.
2.4.1. Access to many activities and professions is still highly regulated
Heavy regulations can reduce business dynamism by raising barriers to entry or scaling up, reduce competitive pressures and impose costs on business or hinder business activities. The 2024 OECD Product Market Regulation (PMR) indicators show that Austria maintains somewhat high barriers to entry and burdensome administrative requirements compared to other OECD and EU countries (OECD, 2024d; Figure 2.15). Austria’s overall PMR score sits above the OECD average, which is indicative of more regulations, and is significantly higher than that of Sweden, the Netherlands, or Denmark. Administrative and regulatory demands on companies remain heavy (Figure 2.15, Panel B). Barriers to entry in services are among the highest in the OECD (Figure 2.15, Panel C). Although earlier reforms increased competition in network sectors, regulation still hampers competition in rail transport, road freight, retail trade and pharmaceutical distribution.
Occupational entry regulations for professional services are among the most restrictive in the OECD. These barriers limit competition in fields like accounting, engineering, architecture, and real estate. For instance, to be admitted to the professional examination, chartered accountant candidates must hold a relevant degree from an Austrian university or university of applied sciences and have at least 1.5 years of practical experience as a trainee accountant, trainee auditor, or assistant auditor in a recognised auditing association or firm. Alternatively, applicants may qualify with a professional licence under the Public Accountant Law or at least 3.5 years of experience as a management accountant.
The profession of real estate trustees in Austria includes real estate agents, property managers, and developers, each with distinct reserved activities. Legal qualification is required only for self-employed practitioners or managers, not employees. There are four qualification pathways, most requiring a five-year training period and a qualifying examination covering legal, commercial, and professional topics. Candidates can qualify through combinations of relevant university or trade education and 1–2 years of professional experience, depending on the level of prior education. Opening the licensing system to more competition by broadening qualification pathways or reducing experience requirements, while maintaining quality standards, would improve labour allocation and overall productivity.
Index from 0 (least restrictive) to 6 (most restrictive), 2023
Note: The OECD aggregate corresponds to the unweighted average of the OECD countries. 2023 is the year in which the majority of the data were collected. However, in some countries the data collection was completed at a later date. The latest Tariff data available for Mexico date from 2018, hence this data have been used to calculate the low-level indicator tariff Barriers for 2023 for Mexico. Panel A: The PMR corresponds to the simple average of two high- level indicators: distortions induced by state Involvement and barriers to domestic and foreign entry.
Source: OECD 2024 PMR Indicator database (2023 methodology).
2.4.2. Fostering competition in key markets
Low competition increases prices and reduces business dynamism. Recent evidence shows that market concentration remains high across many sectors. In 2020, the four, eight, and twenty largest firms held average output shares of 52.9%, 65.3%, and 79%, with an average Herfindahl-Hirschman index (which measures market concentration) of 0.16 (Peneder and Unterlass, 2024). Average markups across 26 sectors reached 33%, highest in non-financial market services (39.6%), followed by manufacturing (18.7%) and construction (13%). Markups grew most in real estate and business services like legal, accounting, advertising, and administrative activities—areas also marked by high barriers to entry.
The Federal Competition Authority has stepped up market investigations to ensure fair competition. Post-COVID inflation triggered probes into groceries, retail, energy markets, and online food delivery. Digital markets with online intermediaries have emerged as new sources of competition risks. Since the war in Ukraine and the energy crisis, high energy prices, rising market concentration and weak business dynamism have become more pronounced (BWB and E-Control, 2024). The joint task force of E-Control (the independent regulator for electricity and gas) and the Competition Authority found that electricity and gas market concentration has grown since 2022. Available offers and customer switching fell sharply, and prices for new customers stayed high and detached from wholesale prices. Most regional suppliers sell mainly within their own grid areas. Only three of nine state energy suppliers offer electricity tariffs nationwide. E-Control and the Competition Authority should work to create a more integrated, competitive market, by inducing suppliers to compete on more Landers or on a national basis. Regulations should also require clearer, more comparable contracts, as varying tariff formulas make pricing unpredictable for consumers.
Reducing corruption can contribute to stronger and more inclusive economic performance. Corruption tends to increase uncertainty and transaction costs, which may discourage investment and reduce productivity (Wei, 2000). It can also affect public spending efficiency, potentially diverting resources away from growth-enhancing areas such as infrastructure, education, and innovation (Tanzi et al., 1997). Evidence suggests that economies with strong integrity frameworks and lower levels of corruption generally experience higher investment rates, improved productivity, and more efficient public sector outcomes (IMF, 2019).
Austria performs below leading OECD countries on corruption perception and control indicators (Figure 2.16). Public perceptions of corruption have improved recently (Eurobarometer, 2025). While domestic trust in government has risen to 54 %, trust among European peers has fallen to 36 %. Recent reforms have strengthened enforcement. The Corruption Criminal Law Amendment Act 2023 increased penalties, especially for high-value bribes. The OECD Working Group on Bribery (Phase 4 evaluation, 2024) commended Austria for expanding resources for specialised police and prosecutors and improving financial and IT expertise. The Whistleblower Protection Act (2023) introduced a general framework for whistleblower protection in line with international standards. Further measures are needed to clarify legal provisions and enhance enforcement capacity. Austria should improve detection and prosecution of foreign bribery, including faster reporting by public officials. The forthcoming anti-corruption strategy should explicitly address foreign bribery risks and integrate prevention, detection, awareness-raising, and enforcement components.
Austria’s anti-money-laundering and counter-terrorist-financing (AML/CFT) framework complies with EU directives, with the Austrian Financial Intelligence Unit (A-FIU) playing a central role. However, foreign bribery and corruption risks are under-recognised: the National Risk Assessment (2021) does not explicitly cover these offences, and A-FIU reports rarely list bribery or corruption as predicate crimes (OECD, 2024). The next risk assessment should incorporate such risks, develop typologies of foreign-bribery schemes, and expand targeted training to improve detection.
The Whistleblower Protection Act implements the EU directive but has limited scope. It excludes related offences such as false accounting and money-laundering and does not fully protect whistleblowers in entities with fewer than 50 employees. Amending the law to include these cases would broaden coverage and strengthen protection. Institutional independence could also be reinforced. The public prosecution service remains hierarchically subordinate to the Minister of Justice, who may issue binding instructions in individual cases. Implementing the government’s decision in July 2025 to establish an independent Federal Prosecutor’s Office, as recommended by the European Commission (2023), would strengthen prosecutorial autonomy.
Note: Peers is the unweighted average of Denmark, Germany and the Netherlands. The OECD aggregate corresponds to the unweighted average of the OECD countries. Panel B: Data come from the Flash Eurobarometer survey "Citizens' attitudes toward corruption" which has run 11 times since 2005. The survey question is: "Over the last 12 months, has anyone in your country asked you, or expected you, to pay a bribe for his or her services?" up to 2013, and "Thinking about these contacts in the past 12 months, has anyone in your country asked you or expected you to give a gift, favour, or extra money for his or her services?" afterwards. Panel E: figure shows ratings from the FATF peer reviews of each member to assess levels of implementation of the FATF Recommendations. The ratings reflect the extent to which a country's measures are effective against 11 immediate outcomes. "Investigation and prosecution¹" refers to money laundering. "Investigation and prosecution²" refers to terrorist financing.
Source: 2018 World Bank Worldwide Governance Indicators (WGI); Eurobarometer; OECD Public Integrity Indicators; OECD, Financial Action Task Force (FATF).
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