The teaching of entrepreneurship as an academic subject, as opposed to the apprenticeship route, is the subject of ongoing debate. The authors suggest that there is a middle road and that, by integrating the business world into teaching in a significant way, the best of both approaches can be achieved. In a similar vein, the credibility of some university interaction with small business has been called into question. The authors discuss how they have used the role of "entrepreneur in residence" (EIR) to integrate and improve research, teaching and academic-business interaction. The paper describes the experiences of the EIR hosted at Lancaster University Management School's Institute for Entrepreneurship and Enterprise Development (IEED) in the UK and examines the outcomes of his work and his perceptions of university life; how his presence challenged internal thinking; and how his fellowship led to service innovation in the host organization. Other formalized EIR activities within and outside the UK are also reviewed; and the authors conclude by proposing how UK HEIs might best make use of similar opportunities, with a challenge to non-management departments. The paper demonstrates one way in which the perceived gulf between entrepreneurship teaching and the business world can be bridged to good effect. (Contains 2 tables and 1 note.)