Dozens of universities have had restrictions imposed on their funding for engaging in knowledge transfer with businesses, under a new cap.

The Russell Group of research-led universities this week complained that excellence in the transfer of knowledge between ÖйúAƬ and business was not being properly "rewarded and incentivised" despite a general increase in the funds available.

The allocations made under the fourth round of the ÖйúAƬ Innovation Fund (HEIF), for the three-year period 2008-09 to 2010-11, were published this week.

The sums being distributed have risen - up to ?150 million in 2010-11 - but the maximum available to individual institutions is being limited for the first time.

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Of the 130 institutions receiving money, 36 will hit the ?1.9 million cap in the third year of allocations.

Members of the Russell Group are among them, along with research-focused 1994 Group institutions such as the universities of Exeter and Durham, and post-92 universities including Birmingham City and Coventry.

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David Eastwood, chief executive of the ÖйúAƬ Funding Council for England, said the wide range of institutions illustrated the maturity of third-stream activities. "What I take away from this is the extent to which these activities - knowledge-transfer activities, business consultancy and so on - are deeply embedded in the sector," he said.

Rama Thirunamachandran, Hefce's director of research, innovation and skills, said that the cap was necessary because the pot of money, although it is larger than before, was still limited. "The full range of universities are contributing to the knowledge-transfer agenda, so it's right that they should all share the ?150 million, and that can only be achieved with a cap.

"It's significant that of the 36 universities ... some are research intensive, some focused on engagement with business and some are large, multi-faculty teaching-intensive institutions," he said.

Another first for HEIF4 is the allocation of money by formula only - in HEIF3, 75 per cent was distributed by formula and 25 per cent through competitive bids.

Dr Thirunamachandran said: "The move to 100 per cent formula is the least burdensome approach, allowing universities to choose how to invest."

Wendy Piatt, director-general of the Russell Group, said that all the group's English universities reached the absolute or relative cap on funding for HEIF4.

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She said: "The Russell Group greatly welcomes the overall increase in HEIF funding.

"However, we would question the use of an absolute cap on institutions that are excelling in this area - at least a cap at a level that almost all our institutions exceed.

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"In an area of such key strategic importance to the growth of the UK economy, it is essential that excellence is fully rewarded and incentivised."

Other institutions that were capped, including post-92 universities, were more philosophical about the ?1.9 million limit.

John Rance, director of enterprise and commercial partnerships at De Montfort University, said: "Of course if the cap were removed and we had more capacity funding we could do even more. But I also recognise that the sector as a whole needs to develop."

Oisin MacNamara, director of research at Northumbria University, said most universities got the funding they were expecting.

He also argued that the cap had ensured a more equitable distribution: "Some of the previous mechanisms, certainly in terms of research income, have not been a level playing field."

Saying that elite institutions such as Oxford and Cambridge would be "way out in front" if the cap were not in place, Dr MacNamara acknowledged that some may be "frustrated" by the limit.

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He said: "The bottom line is that most universities will get more than twice what they're getting at the moment within three years, and we should all be happy with that."

john.gill@tsleducation.com.