Bridges vol. 41, October 2014 / Feature
By Natalie Plewa
In the framework of one of the most important annual innovation events in Austria – the Technology Symposium Alpbach 2014 – a dynamic discussion focused on technologies “made in Austria” conquering niche markets around the globe.
A group of government, research, and industry experts discussed how Austrian enterprises were able to become global leaders in numerous areas of infrastructure technologies and why it is important to further support their endeavors to market their technologies on a global scale.
Austria is an export country. That is what Karl Blecha, former Minister of the Interior, repeatedly stressed during the breakout session on Technology and the Global Market in Alpbach this year. In 2013 Austria exported €125 billion worth of goods – with higher numbers projected for 2014. In terms of its GDP, Austria hence receives €6 out of every €10 from outside its borders.
But who are the drivers behind this high export success? According to Ferdinand Schipfer from OeKB – Österreichische Kontrollbank, Austria has a very particular economic structure. “We have a lot of mid-caps and even more small and medium-sized companies,” says Schipfer. These firms are setting innovative trends and are contributing at a disproportionately high rate to the Austrian economy.
While other nations might benefit from more natural resources, colonial traditions, or global political influence when engaging in foreign economic activities, Austrian companies succeed abroad through innovation and quality. Due to their size, Austrian companies rarely serve as general contractors in foreign businesses. However, they regularly play an important role as subcontractors and component manufacturers. Their alleged “smallness” bears additional benefits: Many Austrian companies are still family-owned which – according to Schipfer – often makes them less vulnerable to short-term decisions that favor the next quarterly financial statement. It also allows them to focus on long-term business relations and respond more flexibly in times of change or crisis.
Austrian companies acting as technology pioneers
Another reason for Austria’s success in foreign exports is the type of goods and services that companies focus on. This was the understanding shared by all roundtable panelists, which also included representatives of the Austrian Ministry for Transport, Innovation and Technology and the Austrian Chamber of Commerce. While the portfolio of the nation’s foreign sales is remarkably broad, ranging from groceries and machinery to chemical products, the one area in which Austrian companies score particularly well is infrastructure technologies.
Infrastructure technologies consist primarily of intelligent transportation systems and urban technologies, as well as rail, communications, hydropower, health, and security technologies. In all of these areas Austrian firms like the two represented at the panel, namely, Andritz Hydro and VAMED, are top global players.
These technologies show growing demand in “emerging markets.” One obvious aspect of these markets is that they have a backlog demand in areas such as transport, energy, health, communication, and security infrastructure; on the other hand, these markets reflect the demands of a rising middle class that increasingly expects infrastructure standards comparable to those in developed countries.
This is where Austrian expertise comes into play, according to Johann Strahlhofer, managing director of VAMED Engineering GmbH & Co KG, Vienna, one of the leading international companies in the field of health services. Adequately equipping healthcare facilities in terms of preventive health care, acute care, and rehabilitative services is about to become one of the main challenges for emerging countries – a challenge that can be tackled successfully with Austrian technology support.
Federal support for Austrian companies abroad
Export-oriented companies are an important pillar of the Austrian economy. They create jobs, foster national competitiveness, strengthen the country’s position as a business location, and are drivers for innovation and development. For those reasons, the Staff Group for Technology Transfer and Security Research at the Austrian Federal Ministry for Transport, Innovation and Technology (bmvit) – has been charged with the mission of helping Austrian companies increase the technology-related share of their exports.
How can the Austrian government support the sales of Austrian technology abroad? This is a question often asked of Barbara Steiner, deputy head of bmvit's Technology Transfer Staff Group.
In terms of infrastructure projects in emerging economies such as China, Russia, Kazakhstan, Indonesia, India, Vietnam, Albania, or Chile, local governments often play a considerable role in the decision to award the project or in the tendering procedure.
The goal of the Staff Group for Technology Transfer and Security Research therefore is to create favorable framework conditions for Austrian companies trying to implement technology projects in these emerging economies. The Ministry signs cooperation agreements with local governments and, together with its counterpart, defines projects of mutual interest to be officially supported by both countries.
By doing so, bmvit opens the door for Austrian companies, providing access to decision makers and creating awareness of quality technology “made in Austria.” It also offers official support in case an Austrian company faces project-related difficulties.
In its attempts to promote transfer of technology from Austria to emerging or promising markets, bmvit is strongly supported by its infrastructure-technology cluster Austrian Technology Corporation ATC, which acts as official project coordinator on the Austrian side.
A new technology-transfer instrument introduced by the Ministry is the support program on strategy studies for positioning Austrian technologies abroad. The program should further assist Austrian companies in gaining a foothold in foreign markets.
This initiative was put in place jointly with the Austria Wirtschaftsservice (AWS), an Austrian federal development and financing bank for the promotion and financing of companies. According to Edeltraud Stiftinger, CEO of AWS, it goes without saying that Austrian technology companies need to “go international.” “Because of the small domestic market, there is no alternative to an internationalization strategy for technology businesses in Austria,” says Stiftinger. Such a strategy should especially focus on efficient ways to transfer research results into marketable products and then adapt these products to specific needs of the respective foreign markets. In this context, it is particularly beneficial to be able to demonstrate reference installations or pilot plans in the company’s home country or – preferably – in the target market. In addition, a well-developed network and a clear patent strategy are crucial success factors for international business.
These factors, combined with the support of Advantage Austria – the internationalization agency of the Austrian Chamber of Commerce – are an effective formula for success when it comes to doing business abroad. Walter Koren, director general of Advantage Austria, stated that the agency has more than 115 offices around the globe and, by acting as a “technology sherpa,” it supports Austrian companies on their global “tech ways.” Advantage Austria has established partnerships with leading universities and research institutions worldwide. It offers, among other things, B2B-events and showcases in key markets as well as expert on-site support.
It's all about risk management
Despite the vast opportunities offered by international projects, there is always a certain amount of risk involved in dealing with foreign partners. “When this risk is getting too high for banks and private insurers, export credit agencies such as the OeKB-Österreichische Kontrollbank AG come into play,” says Schipfer.
Austria has a particularly well-developed export promotion system, according to Schipfer, with a special feature being the OeKB`s role as a one-stop shop for insurance and favorable financing. Federal support through OeKB has significantly strengthened the development of many hidden Austrian champions, which are now world leaders in their technology niches. The soft loan program is an especially important supporting tool for conquering new markets. Schipfer adds that many foreign partners are not only looking for high-quality technology solutions and reliable suppliers in Austria, they also demand financing possibilities for their investments – something OeKB is dedicated to providing.
Alexander Schwab, responsible for market management and corporate communications at Andritz Hydro GmbH, agrees that many of their projects would not have been possible without the support of OeKB.
Being a global supplier of electro-mechanical systems and services for hydropower plants, and one of the world-market leaders for hydraulic power generation, around 50 percent of Andritz Hydro`s customers are public. While the other 50 percent might be privately owned entities, they still depend heavily on governmental authorities when engaging in hydropower projects with foreign partners (in terms of licensing, permissions, supply agreements). Thus, the international success of the company is strongly linked to decision-making authorities in foreign countries. Although state-of-the-art technology, quality, and pricing, as well as the right strategic approaches, are defining the company’s global success, several additional “soft factors” can be decisive.
For instance, positive bilateral relations play a critical role. So do the functioning of overall economic relations between Austria and the target country (including foreign trade agreements or double taxation agreements). Frequent visits and official receptions also promote a positive business climate and often trigger project decisions. Bilateral cooperation agreements – if exploited appropriately – are much more than theoretical tools. They can significantly contribute to project success, especially when providing means for official intervention.
There are plenty of ways in which technology-exporting companies from Austria are being supported in their attempts to succeed on international markets. Whether through governmental cooperation agreements and political support, or through specifically designed promotion programs, the selection is large. However, not every instrument can be applied to every target country. In some states, government-to-government (G2G) intervention has no significant influence on business projects, although even in these countries matchmaking and partnering activities carried out through cluster organizations can support the development of new businesses.
In any case, in light of the steadily growing global competition, the importance of promoting the export of Austrian technologies is growing in order to promote a solid, competitive, and promising national economy.
Natalie Plewa is currently visiting expert at OSTA Washington from the Ministry for Transport, Innovation and Technology. In BMVIT she is responsible for bilateral technology transfer activities, focusing on establishing and developing Austrian technology cooperation with the CIS region.