Purpose: The aim of this paper is to examine an early articulation of some of the key factors in building capacity and the potential for knowledge exchange (KE) within a small, learning and teaching-oriented organization. Design/methodology/approach: An action research study is planned as a practical enquiry. In common with other action research, this study is being carried out in a single organization and is aiming to devise and plan changes in practice. Findings: A reorganization of the institution in line with policy is critical to ensure that the university insulates itself from the significant risk of knowledge isolation, The context, a relatively static workforce, a learning and teaching focus and the size of an organization may effect its ability to be responsive and knowledge productive in KE. Research limitations/implications: Early insights relate to a reorganization of systems to support KE and the context in which that change will take place. The paper seeks to propose a way to research organizational change in a university in the face of new policy and strategic drivers. Practical implications: A critical understanding of policy promoting KE is a sound underpinning to practice and strategic improvement in the area. The purpose and values underpinning enterprise initiatives can legitimate a university to reclaiming a pivotal social and commercial role in regional regeneration. Originality/value: KE supported by a small university requires "strategic capability", as proposed by Harrison and Kessells. A workforce competent to deliver on three critical factors within the organization; economic performance, knowledge productivity and learning capability. (Contains 1 figure and 2 notes.)