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As little is known about the productivity levels of small and medium-sized enterprises (SMEs) engaging with universities and the relative changes in productivity of SMEs subsequent to these collaborations, the paper examines the following questions: (1) Does the relative productivity of SMEs engaging in university collaboration differ from those that do not? (2) Are subsequent changes in firm productivity following university collaboration related to their initial levels of productivity?

The paper utilises data on 254 SMEs from the Longitudinal Small Business Survey and uses two statistical techniques: First, bivariate tests of difference were used to inspect the relationships between productivity levels and whether the firm collaborated with a university to introduce its innovation. Second, ordinary least squares regressions were used to test whether the future productivity of SMEs that collaborated with universities was related to their initial productivity levels.

The analysis reveals that SME–university collaboration is unrelated to starting productivity. Furthermore, the analysis suggests a nonlinear relationship exists between the starting productivity of SMEs and their subsequent productivity following a university collaboration. Therefore, higher levels of subsequent productivity are observed among those SMEs where starting productivity was either relatively low or high, suggesting that collaborations have a transformative effect on SMEs with relatively lower initial levels of productivity and a maintenance effect for SMEs with relatively higher levels of initial productivity.

Given the fact that the extant literature also suggests that, overall, university collaboration is beneficial, policymakers should strive to encourage greater levels of collaboration involving SMEs. In light of the evidence that SME–university collaborations can transform less productive firms, it appears unjustified for practitioners and policymakers to only consider stronger-performing firms to be included in such programmes.

The study contributes new theoretical and practical knowledge to the understanding of the role of firm productivity in predicting the proclivity of firms to collaborate with universities. Furthermore, as few studies have examined the impact of these collaborations on the subsequent productivity of firms that collaborate with universities, this paper fills an existing gap in the literature.