Growth Without Liquidity? Evidence of a Funding Paradox in European Research and Technology Organisations

Research and Technology Organisations (RTOs) occupy a critical position within the European innovation ecosystem by supporting technology transfer, industrial competitiveness, and applied research. Despite their strategic importance, relatively limited attention has been devoted to understanding the financial sustainability of RTOs operating under project-based funding structures. This study investigates the relationship between organisational growth, liquidity behaviour, and financial stability across five major European research centres: AIT, RISE, SINTEF, TNO, and VTT. Using a comparative longitudinal design, the analysis examines audited financial statements and annual reports covering the period 2018–2024. The study combines horizontal financial analysis with selected indicators of revenue growth, asset development, profitability, liquidity performance, asset turnover, and Changes in Cash Against Revenue (CICAR). The findings indicate that organisational growth does not consistently translate into stronger liquidity positions or improved financial stability. Several centres experienced substantial expansion in revenue and assets while simultaneously displaying volatility in cash reserves and liquidity indicators. The results further reveal recurring timing-related financial pressures that are consistent with the characteristics of project-based funding structures, particularly the potential mismatch between expenditure commitments and the timing of funding receipts, and that may remain obscured when conventional financial ratios are considered in isolation. All five research centres exhibited at least one period in which positive revenue growth coincided with declining cash, accounting for 10 of 29 comparable organisation-year observations. The study develops and provides exploratory evidence consistent with the concept of the Funding Paradox to explain how successful participation in competitive research funding systems can simultaneously support organisational growth and contribute to financial adjustment pressures. The findings provide new insights into the financial behaviour of European RTOs and offer implications for research managers, policymakers, and funding agencies seeking to strengthen the long-term sustainability of publicly supported research organisations.