Increasing university-industry interaction and university contribution to the local economy are compatible -conventional wisdom would say. However, as other university activities, interaction with industry may be limited due to a lack of absorptive 2 The views expressed in this article are those of the authors and may not in any circumstances be regarded as stating an official position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission

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... s responsible for the use that might be made of the following information. capacity in local firms. The data of those participating in the European Union's 6 th R&D Framework Programme (FP6) was used to obtain values for the number and, notably, the budgets of UII projects at regional level for the EU27. Two types of interactions were considered: inside and outside the region. Our analysis indicates that universities from regions whose firms have low absorptive capacity participate more often in FP6 projects with firms outside the region. Our results highlight the value of policies that facilitate firm R&D to enhance collaboration with regional universities. Introduction University-industry interaction (UII) has increased in most developed countries over the last 30 years or so, due to changes in societal demands and institutional changes that have redefined the needs of universities for funding. However, we can rarely find explicit targets in policy rhetoric or documents about how much UII should take place inside and outside the region. Both types of UII are important, but explicit attention on the balance between the two has been lacking so far. Therefore, as a first step, our paper aims to map both types of UII in the regions of the European Union (EU) 27, motivated by a desire to stimulate policy awarenessand perhaps policy actionregarding territorially imbalanced UII. To do so, we examine UII as captured the EU's 6 th Framework Programme for Research (henceforth FP). FP participations present a unique data source in terms of scaleit accounts for a substantial proportion of publicly-funded R&D activity in the EU, by some accounts up to 5% (EC, 2009: 105)and scope, covering all of the EU as well as a near-comprehensive cross-section of R&D stakeholders. Although the FP's transnational nature means that it is biased toward interregional UII, this bias does not seem to be important if one wants to compare the characteristics of regions with more or less inter and intraregional links. Building a hypothesis about the relationship between localisation of universityindustry interaction and absorptive capacity of firms in the region Higher absorptive capacity increases university-industry interaction Cohen & Levinthal (1990: 128) label a firm's absorptive capacity as "the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to