Increasing university-industry interaction and university contribution to the local economy arecompatible –conventional wisdom would say. However, as other university activities, interactionwith industry may be limited due to a lack of absorptive capacity in local firms. We exploit data onparticipations to EU 6th R&D Framework Programme (FP6) to generate measures on the numberand, notably, the budgets of UII projects at regional level for the EU27. Our analysis indicates thatuniversities from regions with low absorptive capacity participate more often in FP6 projects withfirms outside the region. Our results highlight the value of policies that facilitate firm R&D toenhance collaboration with regional universities.