This article questions the assumption that increasing competition among higher education institutions is the best method of achieving a strong higher education sector in developing countries. It notes that there has been increasing emphasis on the importance of higher education institutions for sustainable development, particularly because of their importance to the global knowledge economy. For the same reason, the appropriate management of the relationship between the state and higher education institutions is vital to a strong and dynamic future for these institutions. This paper proposes a menu of options for higher education governance, grouped around 'state-centric' and 'neo-liberal' models of development. The 'state-centric' model proposed is based on a variety of examples of high performing Asian economies, in particular, while the 'neo-liberal' model is based on emerging trends in higher education management in countries such as Australia, the United States and the United Kingdom. The paper suggests that despite pressure across the globe to encourage a market among universities, this may not always be the most efficient use of resources, or the best way to integrate universities in a country's drive for economic growth.