This paper examines two models of interaction between private and public institutions in respect to the process of innovation. While private firms adopt proactive strategies and public institutions follow it is considered that, under certain conditions, public institutions are the innovator and private firms are the followers. The first part of the research is theoretical and formulates the two models and their implications. The second part presents a case study of Italian products which have Animal Welfare (AW) attributes, where production follows the second relationship model. The case study shows that AW friendly products are the result of EU legislation, which obliges the industry to adapt production, organisation, publicity, communication and promotion. This is the inverse of the traditional relationship where private firms take the initiative.