University Quality as Moderator of Technological Variety on Regional Innovation Performance

This paper investigates the role of university quality on regional knowledge production and the synergistic relationship between academic excellence and technological variety. We employ an extended Regional Knowledge Production Function (KPF), utilizing data from 209 EU NUTS-2 regions over the period 2003–2012. University quality metrics are derived from the Academic Ranking of World Universities (ARWU), while technological variety is measured via Shannon’s Entropy Index, allowing for the distinct decomposition of related and unrelated variety. The empirical analysis utilizes panel negative binomial estimation, with fixed effects panel models to examine the robustness of the results. Our results demonstrate that the presence of high-quality universities is significantly correlated with regional innovation capacity. Specifically, these institutions act as “knowledge hubs” that improve intra-regional spillovers across related and unrelated technological sectors, but with diminishing marginal returns. The Granger causality test, considering regional heterogeneity, reveals bidirectional causality, with the university’s quality effect on patent production being stronger than the reverse. Our findings suggest that investment in academic quality serves could significantly strengthen the regional innovation ecosystem regardless of whether the local economy is specialized or highly diversified.