This paper considers the role of universities in the creation of a knowledge-based economy (KBE) in a developing country, Pakistan. Some developing countries have moved quickly to develop a KBE, but progress in Pakistan is much slower. Higher education plays a crucial role as part of the triple helix model for innovation. Based on the perceptions of university leaders and academic staff, the paper examines how the transformation towards a KBE in Pakistan is viewed within higher education and identifies some of the blockages and contradictions that hinder development. In particular, the paper suggests that a more integrated education system bringing together primary, secondary and tertiary education to work for a common purpose will be essential.