Although teaching is a core mission of universities, we know little about industry’s input into universities’ teaching activities. This paper advances research on teaching-focused university–industry collaborations (UICs) by studying the determinants of universities’ participation in these collaborations as well as the impact of teaching-focused UICs on graduates’ employability competencies. We designed a three-staged mixed-methods approach in the context of Indian Higher Education Institutes (HEIs). In the first stage, we conducted nine case studies through 53 interviews with Indian HEIs and their industrial partners to understand what factors facilitate or hinder an HEI to engage in teaching-focused UICs. In the second stage, we tested the influence of these factors on HEIs’ propensity to form teaching-focused UICs using data gathered from the websites of 2,280 Indian HEIs. In the third stage, we studied the impact of these collaborations on graduates’ employability competencies on the subset of 486 HEIs for which data on graduates’ employability competencies are available. Our results show that among institutional factors, location, the academic autonomy of an HEI and government-supported intermediary organizations facilitate HEIs’ participation in teaching-focused UICs, whereas the HEI’s public ownership inhibits such collaborations. Among HEI-level factors, we found that an HEI’s size, discipline variety, academic embeddedness and industrial embeddedness facilitate its participation in teaching-focused industrial collaborations. Lastly, our results demonstrate that graduates from HEIs collaborating in teaching-focused UICs are able to acquire better employability competencies, particularly domain-specific employability competencies.