This article presents an overview of research partnership activity across the South African higher education system, in three cutting-edge high-technology fields. An analytical matrix of partnership forms is developed, shaped by distinct responses to the tension between the new financial imperatives and the traditional intellectual project of higher education. Using the matrix, four groups of institutional response to partnership are identified. These may be distinguished in terms of their level of research capacity and the sets of strategic policies, institutional structures and interface mechanisms they have in place to promote partnerships with industry. The core argument of the paper is that more institutions need to develop the capacity to harness the potential for innovation, rather than allow the unregulated proliferation of contract and consultancy forms of partnership with industry that can undermine their core long-term knowledge-generation function.