Abstract<\/strong><\/p>\n\n\n\n Employment effect of firms\u2019 innovation is a widely studied topic at both cross-country and national level, while still few contributions deals with the local dimension. Moreover, the role of the institutional factors is still unexplored. In this manuscript, the author estimates the impact of private firms\u2019 R&D spending, institutional quality and their interaction on the employment rate of the Italian regions. To accomplish his task, the author proposes two dynamic panel models and computes them through the Ordinary Least Squares (OLS), Fixed effects (FE) and System Generalized Method of Moments (GMM-SYS) regression tecniques. The obtained results suggest that the employment impact of firms\u2019 innovation is negative, while the ability of the regional institutions to attract, support and cooperate with the innovative companies and the R&D investment programs jointly financed by regional governments and private firms positively affect the employment rate. The author has deduced appropriate policy implications from the provided evidence.<\/p>\n\n\n\n