This thesis investigates the local innovation system of public research organisations in the Thai context, in which research centres and firms are co-located in a planned science park, with particular emphasis on the influence of co-location on interactions between research centres and local firms, and the research collaboration between the research centres and industrial firms. It aims to gain insight into the factors that influence the interaction of research centres and firms located in close proximity and the ways in which research centres and firms interrelate in relation to their research collaboration. This thesis draws upon three theoretical concepts: the concept of local innovation system, the concept of proximity, and the theories of inter-organisational relationships.The study suggests that co-location (i.e. physical proximity) to research centres does not normally lead to formal interaction between local firms and research centres in this context. Most of the interactions between them were found to be informal. Thus, the influence of physical proximity on the interactions and linkages of actors in this local innovation system is to some extent over-estimated. There is insufficient synergy to create an innovative surplus from co-location of firms and research centres in this context. The study also suggests that promoting social and technological proximity between research centres and local firms, by introducing institutional or organisational arrangements that would facilitate these two dimensions of proximity, encourages greater extent of formal interaction between them as well as facilitates benefits from spatial relation of these local actors. Despite the absence of formal interaction with local firms, research centres collaborate with firms located outside the science park. The study introduces a typology to understand how research centres work with firms and shows that most of the collaborative projects involved industrial application and utilisation of technological knowledge accumulated within the research centres, which applied to the firms' products or development processes. Many of these projects resulted from collective projects or partnering experience between the research centre and firm, and were likely to follow with subsequent collaborations. In addition, the study reveals that technological factors, i.e. technological relatedness between the knowledge base of firms and research centres and firm's technological capacity, influence the way in which research centres work with firms in collaborative projects. Organisational and institutional settings of research centres, as well as cultural factors are identified as barriers of research collaboration in this study.The thesis concludes by indicating that physical proximity alone cannot trigger interaction of actors, especially formal interaction such as research collaboration, bounded by spatial relation. Interaction between public research organisations and firms can take place without closeness in distance. Other dimensions of their relationship are important factors influencing their interaction. The research collaboration between research centres and firms is a complex process and requires supportive organisational and institutional arrangements and effective policy intervention.