Partnerships between universities and industrial firms can play a key role in enhancing competitiveness because they provide a conduit for for the spillover of knowledge from the academic organization where knowledge is created to the firm when it is transformed into innovative activity. We set forth in this paper a model of industry/university participation, and we test the model empirically, using research project data on entrepreneurial firms that were funded through the US Deartment of Energy's Small Business Innovation Research (SBIR) program.