Purpose – The purpose of this paper is to resolve a tension in understanding how universities contribute to knowledge-based urban development (KBUD). Design/methodology/approach – The paper is a conceptual paper, which analyses the tension as emerging between the university and the wider societal activity. The paper creates a framework for combining insights from both those theoretical frameworks to better understand why universities might choose to contribute to KBUD. Findings – The paper argues that it is important to understand the benefits that the universities get from participating in the KBUD. This can be through the unique tacit knowledge that emerges in the social innovation process, but their might also be value for the university in terms of two other variables, material resources and symbolic legitimacy. Research limitations/implications – The paper is a literature review and therefore is limited to raising a series of future questions and directions for research in the field, as well as to providing a lens and context for existing work. Practical implications – There are clear implications for those seeking to improve universities contributions to KBUD. It is not merely enough for strategic leaders to come together and agree that promoting the university will promote KBUD: it is necessary to modify a range of processes within the university to ensure that a wide range of actors are able to benefit from participating in KBUD activities, and that it facilitates their own teaching and research activities. Social implications – For universities to make a substantive contribution to promoting KBUD, policy-makers must ensure that they do not create disincentives through universities’ teaching and research activities. Originality/value – This is the first time that a paper has sought to bridge between theories of urban development and social innovation, and universities’ internal institutional and organisational dynamics.