Over the past two decades, Austria has become one of the most R&D intensive economies among OECD countries and in the world, dedicating 3.1% of its GDP on R&D in 2016, the second highest figure in the European Union. To fully harness this R&D capacity, Austrian innovation policy needs to put a stronger emphasis on efficiency in transforming R&D inputs into impacts. To achieve higher impacts, Austria also needs to steer its research and innovation system towards leadership excellence in global markets. This requires enhanced international attractiveness for top-level researchers and talent, and a conducive environment for highly innovative enterprises. Austria could also benefit from strengthening R&D and innovation to support key transitions, such as digitalisation and Industry 4.0, and to tackle key societal challenges. The STI policy mix and governance arrangements should be adapted accordingly.