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Thanaphol Virasa* 12.1 INTRODUCTION It is becoming increasingly apparent that in many countries, innovation has become a central theme of national development. The emergence of the innovation-driven economy has brought changes in public policy such as public sector reform, education reform and privatization. It has also stimulated increased relationships and interactions among knowledge producers, transfer agents and knowledge users (Jacob et al. 2003). The various institutions in a national system (and particularly the relationships and interactions between these institutions) play an important role in determining the rate and direction of innovation activities. These institutions greatly determine how people relate to each other and how they learn and use their knowledge (Johnson 1992). In this policy context, universities – as knowledge producers and transfer agents – play a larger role in industrial innovation as providers of human capital and as the seed from which new firms grow (Jacob et al. 2003). This is especially true for developed countries. In the USA, universities are gradually extending their activities deeper into the technology transfer process (Etzkowitz et al. 2000; Siegel and Phan 2005). They do this by identifying gaps in the technology push process and filling these gaps by establishing incubators to assist the formation of firms from campus research. Concurrently they look to venture capital firms to fill gaps in the provision of seed funding. This study also points out that in the UK, the central government has reduced university research funding and demanded that universities seek alternative sources of funding. This has forced...