In Malaysia, the bulk of foreign direct investment has in essence been more of the passive type and with little effect on the regional innovation potential of the economy. Higher education sector is a crucial area, not only because higher education institutions can increase the supply of skilled people, but also because they can drive national and regional growth. The corporatisation of public universities has been a first step to engage universities on the regional development path, but more is needed to ensure that the current focus on the world class status will not undermine regional and local engagement of universities.