Over the past few decades, universities have been asked to become ever more involved in the development of their regions and countries, through knowledge dissemination, contribution to policy debates or even by becoming leaders in stakeholder coalitions. However, as has been often pointed out, for universities to have an impact on regional fortunes it is necessary to have an appropriate innovation ecosystem, which is often lacking in less developed regions. We approach this issue by discussing the three interrelated dimensions of knowledge supply, demand, and translational activities, through two case studies of university–business engagement in Wales. We also distinguish between narrow forms of engagement, based strictly on the commercialisation of knowledge, and contrast them with broader forms of engagement. Finally, we discuss the practical and normative challenges associated with these interactions, such as the danger of appropriation of public resources by private organisations.