Slovenia has sustained a relatively high level of public expenditure on research and development and a relatively large proportion of employees and value added in high technology manufacturing compared to the EU average. However, innovation among SMEs is relatively low compared to the average in EU member states. This chapter reviews the Slovenian government’s innovation policy framework and the extensive programme to promote knowledge transfer from institutions of higher education and research to the business sector. The review covers policies towards SME incubators, technology parks, technology centres, technology networks, industrial clusters, financial subsidies for high technology SMEs, and the mobility programme for young researchers. The research is based on documentary evidence and interviews, and presents case studies of an innovative university-based incubator and a successful industrial cluster in the automotive industry. It concludes with a number of suggestions for policy measures to improve the transfer of knowledge from HEIs to SMEs.