The Innovation Vacuum: How Georgia’s R&D Neglect Undermines Its Future

Tato Khundadze, Associate Professor at School of Law, Social Sciences and Diplomacy

Georgian American University (GAU)

Following the collapse of the Soviet Union, Georgia experienced a severe and prolonged economic crisis that deeply undermined its scientific and educational infrastructure. What had once been a centralized but well-funded system of scientific research was left under-resourced and institutionally fragmented. Beginning in the early 2000s, under the banner of “optimization,” the state implemented sweeping reforms that dismantled major scientific institutions, slashed funding, and pursued structural integration with universities—often without a coherent innovation strategy or clear national priorities. By 2005, the Georgian Academy of Sciences had been broken down into nearly 70 fragmented institutes, subordinated first to the Ministry of Education and later absorbed into universities, diluting their research capacities in the process.

These reforms, framed as administrative efficiency measures, in fact reflected a narrow, technocratic view of governance. In reality, they left the Georgian scientific system without long-term vision, institutional stability, or adequate public investment. From a heterodox perspective, this represents not just a policy oversight but a fundamental misunderstanding of the role of science and innovation in development.

Mainstream economic thought often views R&D as a sector to be left to private initiative, or at most supported via competitive grants to correct “market failures.” However, scholars like Mariana Mazzucato emphasize that innovation and research are inherently uncertain, path-dependent, and public-good-oriented processes that require mission-driven public investment, especially in the early stages. Georgia’s failure to adopt such a mission-oriented approach has left it unable to develop the structural capabilities necessary for industrial transformation.

From 2005 to 2011, Georgia’s public spending on research and development (R&D) as a share of GDP fell by nearly half. This occurred despite mounting global evidence that successful innovation systems—such as those in South Korea, Finland, or Germany—are built not on short-term project grants but on stable, long-horizon public funding, institutional learning, and strategic coordination between government, universities, and industry.

In 2012, Georgia spent just 0.5% of GDP and 1.8% of its national budget on higher education and research, compared to OECD averages of 1.4% and 3.1% respectively. These numbers not only reflect underfunding—they reflect a lack of strategic vision. As Erik Reinert argues, countries that escape the trap of underdevelopment do so by moving into sectors with increasing returns to scale—typically advanced manufacturing and knowledge-intensive industries. Such transitions depend critically on scientific and technological capabilities, not just liberalization or macro-stability.

But Georgia remains locked in a low-complexity trap. Scientific infrastructure is decaying, much of the institutional memory has been lost, and no serious national innovation strategy exists. As outlined in the Ministry of Education and Science’s own strategic documents, major bottlenecks include:

• The absence of a unified national science policy, making it impossible to prioritize fields or coordinate action;

• A fragmented and short-term funding model based almost entirely on grants, undermining stable research clusters and institutional continuity;

• A demographic crisis in science, with few young researchers entering the field;

• A lack of integration between research institutions and higher education, violating the basic principle of the unity of teaching and research;

• A failure to commercialize innovations or embed them in productive sectors;

• A weak link to global scientific networks, further isolating the Georgian research community.

These failures are not only institutional—they are macroeconomic. As Freeman and Lundvall emphasized, innovation does not emerge spontaneously from market incentives; it requires an ecosystem of institutions that support learning, experimentation, and diffusion. Georgia lacks this innovation system entirely.

Moreover, as shown by the Global Innovation Index, Georgia severely underperforms across core R&D metrics—researchers per capita, total R&D spending, and university rankings. The country lags not just behind global leaders but also behind comparably sized post-Soviet economies, such as Estonia, which has successfully used its innovation system to transition into a digital knowledge economy.

A Strategic Imperative

Underfunding science is not merely an educational issue—it is a developmental crisis. Without a radical rethinking of its R&D policy, Georgia will continue to suffer from industrial stagnation, technological dependency, and structural unemployment.

Georgia must abandon the logic of optimization and adopt a mission-oriented model of innovation, in line with heterodox economic thinking:

• Science and higher education must receive a substantially larger share of GDP and the national budget, at a minimum, aligning with international norms.

• The current grant-based model should be supplemented by core institutional funding, enabling long-term research programs and centers of excellence.

• A National Innovation Strategy must be developed that defines priority sectors, channels funding strategically, and fosters collaboration between state, academia, and industry.

• Innovation diffusion mechanisms—such as public procurement for innovation, development banks, and innovation councils—must be established to support local firms and embed research outputs in the productive economy.

Only by doing so can Georgia lay the foundation for a knowledge-based economy, overcome technological backwardness, and create new engines of inclusive growth. Science policy, in this sense, is not auxiliary to development—it is its backbone.