Alex Neil of the Scottish National Party, who has just become chairman of the Universities' Association for Continuing Education Scotland, said that universities based in a single city, such as Edinburgh, Napier and Heriot-Watt universities, should merge.
Mr Neil, co-convener of the Scottish Parliament's cross-party group on the economy, said that Scotland had to have more top-rated research departments without going down the "divisive" route of research versus teaching universities.
"One way of avoiding that would be to have fewer universities but with each institution being much stronger financially. Radical change has to take place if we are to remain in the top league internationally," he said. Such a move would prevent "double funding" of disciplines and avoid departments working below capacity.
Mr Neil, former chairman of the Parliament's enterprise and lifelong learning committee, also called for pound;100 million to be shifted from the Scottish Enterprise budget to universities where the cash would be earmarked for research and commercialisation.
He accused Scottish Enterprise of "an awful lot of waste" and said the money would be better used by higher education. The agency was criticised last year for spending more than pound;108 million on external consultants.
Mr Neil said that recent reports had flagged the success of higher education in research and commercialisation. Investment in the sector should be "massively expanded". The annual survey of higher education business links showed Scottish universities continuing their lead in transferring research ideas from laboratories to the market-place.
While 8.5 per cent of the UK population lives in Scotland, Scottish institutions filed 17 per cent of new patent applications, up from 12 per cent the previous year. And those patents granted made up 21 per cent of the UK total.
Scotland accounted for 17 per cent of higher education licences to companies and created 12 per cent of academic spin-off companies.