The purpose of this study is to examine how industry sponsors influence student engagement in mechanical engineering capstone design courses. While sponsor partnerships are intended to enhance the authenticity of capstone experiences, their involvement can shape how students participate in and value design activities. Using a constructivist grounded theory approach, we analyzed semi-structured interviews with nine students from two industry-sponsored capstone teams selected for their contrasting sponsor interactions. Findings indicate that sponsors affect engagement through structural mechanisms (namely, role assignment, role enactment, and influence over design processes), and relational mechanisms (communication practices and investment in student success). High-autonomy role selection, flexible role boundaries, and opportunities for design agency-supported engagement, ownership, and alignment with professional practice. In contrast, sponsor-imposed roles, rigid task boundaries, limited decision-making authority, and low responsiveness often led to frustration, reduced ownership, and disengagement. We conclude that sponsor preparation is critical for supporting student engagement in capstone design. Providing sponsors with clear guidelines to promote student agency, facilitate collaboration, and maintain meaningful communication can help ensure that industry partnerships serve both the educational and professional goals of capstone.
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