The decision to limit an additional £6 million of Higher Education Innovation Fund cash to just 12 institutions has angered some sector leaders.
Plans were announced on 13 September to allocate the one-off funding to the "highest performing universities in knowledge exchange".
The move means that the Higher Education Funding Council for England will award an extra £500,000 each to the 12 institutions judged to be the best performers using a formula based on the income each derived from knowledge exchange during the previous three years.
But Libby Hackett, chief executive of the University Alliance, told Times Higher Education that the group had already written to the government asking it to review the decision, adding that Heif funding was already distributed to the best-performing universities.
She added that although additional investment was welcome, "we are strongly opposed to the suggestion that this should be given to a small group of universities without any evidence base for such concentration of funding".
"No justification has been given for why the additional income should not be distributed according to the existing formula for Heif," Ms Hackett said.
Her views were echoed by Pam Tatlow, chief executive of Million+.
"This allocation is disappointing, but it confirms that the policy of hyperselectivity which the government has applied to research funding since 2010 is now being applied to Heif," she said.
The funding, found from efficiency savings in the science and research budget, will be split between University College London, Imperial College London, King's College London and the universities of Birmingham, Cambridge, Hertfordshire, Leeds, Liverpool, Manchester, Newcastle, Oxford and Southampton. It means that allocations for these institutions will exceed the £2.85 million cap currently applied to Heif funding.
Last year, Hefce controversially removed Heif funding for institutions whose knowledge-exchange income would have qualified them for grants under £250,000 and removed a capacity-building component of its funding formula.
Specialist institutions complained that the move was unfair to universities that generate low income but high returns on investment from knowledge exchange.