The changing role of universities in society includes the increasing expectation that academic institutions should engage in collaboration with companies. Industrial PhD programmes are educational tools for building bridges between the academic sector and industry. In these programmes, the PhD student studies and carries out research while being employed in a knowledge-based company or R&D agency. Having reviewed current practice in Estonia and elsewhere, suggestions are offered for improving the use of industrial PhD programmes as a cooperation policy tool. It is argued that these enhancements could help to facilitate university-industry cooperation and therefore could foster the transition to a knowledge-based service society and improve productivity.