This chapter considers how Australian tertiary education may be optimised to contribute to national innovation. It argues that the concentration of Australia's innovation policy on research, and particularly on research in universities, has skewed policy and effort away from its potential to increase productivity. Furthermore, concentrating research to maximise knowledge production has to be balanced by its dispersion to promote knowledge diffusion. Just as importantly, it is necessary to develop the interaction of research units and enterprises, suppliers, consultants, training institutions and associated bodies that comprise the innovation system or cluster in each field. While some clusters seem to develop serendipitously, although over a long time, the process may be strengthened and quickened by coordination, and the chapter closes by canvassing coordinating mechanisms.