Scottish colleges could receive cash incentives previously offered only to universities to improve their links with business under proposals from the country's emerging joint funding council for further and higher education.
A task force for knowledge transfer between further education and business is to be set up by the Scottish higher and further education funding councils.
The two councils, which share the same executive, are expected to merge in three or four years. They have already produced a joint corporate plan.
Roger McClure, the councils' joint chief executive, said the importance of the role of colleges in knowledge transfer emerged while drawing up the joint corporate plan.
He said: "Inadvertently, by bringing the two sectors together, we realised we had probably been missing a trick in further education."
Universities across the UK are seen as working well with large companies, particularly those with their own substantial research and development sections.
"But most of the economy is dominated by SMEs (small and medium-sized enterprises) that don't find it very easy to interact with universities," Mr McClure said. These smaller companies did not necessarily want cutting-edge research, he said, but could raise their ambitions with access to technical and business expertise.
The corporate plan acknowledges that some college staff already carry out commissioned research and consultancy, but says that further education potentially has a significant role that should be explored and, if possible, developed.
Mr McClure said: "We realised that although we'd been allocating a knowledge-transfer grant to higher education, there was no such support for further education. We already have a task force for knowledge transfer in higher education, and we've pledged ourselves to set up a task force in further education and link the two. We need a whole system built up of universities and colleges that covers the whole spectrum of Scottish business, from the smallest SMEs to the biggest players."
While there is general support for the councils' merger, there is wariness in each sector that the other may benefit at its expense.
Mr McClure is reassuring, predicting that far from losing out, colleges and universities will have more influence than they do at present. A single council will operate at a higher strategic level, reducing the number of detailed decisions it takes.
"That will inevitably mean the committee structure will be reinforced and have greater delegated authority, and the committees are where we bring in sector representation," he said.
There had been no dilution or skewing of either sector's role in the joint plan, he insisted.
"Once we embarked down this road, it was surprisingly easy. We had come out with wording for aims (for both) that were so close they were virtually identical and took little adjustment. We have not tried to artificially squeeze them into the same form of words that is a lowest common denominator."
As well as knowledge transfer, the aims and objectives cover fair access, participation and progression in and through further and higher education, and the improvement of learning and skills. The fourth aim underlines that Scotland is now looking to a single tertiary sector, "a coherent system of well-led, innovative and responsive colleges and higher education institutions".
The funding council's role was to sustain the system, not to run it, Mr McClure stressed.
"We don't recruit students. We don't carry out research. In both sectors, the institutions have to respond to a range of communities, and you can't have responsiveness if you're trying to control everything by central Stalinist dirigisme," he said. "The most effective system is going to be where local management is as effective as it can be."
* June 1992: Shefc established
* January 1999: SFEFC established
* March 2002: Roger McClure succeeds John Sizer as joint chief executive
* November 2002: Scottish enterprise and lifelong learning committee recommends Shefc and SFEFC merge in five years
* February 2003: the Scottish Executive accepts the merger proposal
* Easter 2004: draft legislation on the merger expected
* 2005: SFEFC and Shefc merger expected.