In contract research, the business pays the university researchers to undertake a specific piece of research on its behalf. The business will receive the results of the research but is not actively involved in the work other than in commissioning it. Companies often use contract research for specific pieces of near-market research and testing, and universities will tend to charge at least the full economic cost for this work.
In collaborative research, the business and university researchers work together on a shared problem. Collaborative research tends to be more fundamental or pre-competitive in nature than contract research. Industry scientists and engineers will work alongside academic scientists and engineers on the research project. The research is co-funded by business and the university or a public sector body such as one of the Research Councils.
Consultancy takes the form of expert advice or analysis services. In practice the difference between consultancy and contract research is blurred – but the general distinction is that in consultancy the academic provides advice to the business rather than actually conducting research.
(From AURIL: The Association for University Research and Industry)