This paper critically reviews the role of institutional research contractors (eg universities and the CSIRO) in the delivery of effective research, development and demonstration outcomes in mineral and coal processing to the Australian mineral industry. The criteria by which such R&D is justified, and the problems of quantifying the benefits of such research, are considered. Third-party funding mechanisms such as NERDDP and AMIRA are reviewed in the context of the difficulty of setting national research priorities. Some case studies are presented which illustrate both the problems and the advantages of institutional research for industry. The transfer of research outcomes to industry is identified as a significant problem which limits the effectiveness of all institutional research. Other topics reviewed include research management, the relationship between industrial companies and their research contractors, and the real costs of research. The paper offers suggestions for the ingredients needed for a successful industry-institution relationship, based on the Australian experience. It is concluded that the Australian model for this relationship is a very effective one, although there is still room for improvement.