In this paper we consider the reasons for and the costs of limited collaboration between academic researchers and private sector firms. We focus, in particular, on one type of knowledge transfer between the two realms, namely, academic consulting to the private sector. We argue that academics do not understand the value their expertise, methodological approach and soft skills can have for industry. We also argue that industry actors are not fully aware that rigorous, evidence-based advice can be obtained from academics and that, in some cases, advice from academics will either exceed or compare favorably with services obtained from leading consulting companies. The paper is organized as follows: part I surveys the different forms that collaboration between academia and industry can take. Part II examines the empirical data on how much collaboration is actually happening. Part III explores the reasons for the broad disconnect between industry and academia. Parts IV and V argue that the lack of such collaboration results in missed opportunities for both academics and industry and thus constitutes a market failure. Part VI raises suggestions for increasing collaboration.