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Studies show that small and medium-sized enterprises (SMEs) are reluctant to employ graduates and to up-skill existing employees. The cultural barriers exemplified by this unwillingness limit the ability of SMEs to exploit new knowledge and innovate. In conjunction with its goal of producing a ‘knowledge economy’ the UK government is committed to a dramatic increase in participation in higher education. A sharp increase in the supply of skilled labour may result in the under-utilization of graduate skills, especially if SMEs remain reluctant to employ graduates. This paper investigates a collaborative initiative designed to change the mindsets and attitudes of SMEs towards graduates and of graduates towards SMEs. The initiative enables graduates and SMEs to develop an appreciation of potential mutual benefits through an interdependent relationship.