While there is general agreement that stronger university-industry interactions are desirable and in the public interest, these interactions are only means to other ends. The promotion of industrial innovation is the goal of most immediate interest to government, but closer links can also support regional economic development, improve research and development results for government programs, and enhance national research efforts, as well as provide direct gains to universities and firms. Clarity of objectives is the first step toward designing sensible policies or programs. Three broad approaches to strengthening university-industry interactions to promote industrial innovation are (1) direct corporate funding of university research, (2) cooperative (cost-shared) research, and (3) measures to enhance knowledge transfer and the exchange of people. Strong links depend on the free flow of information, ideas, and people between the two sectors; government actions may help or hinder these mutually beneficial relationships. In many cases the best government policy may be to step out of the way and let industry and universities negotiate their own arrangements. (Author/MSE)