Numerous scholars have investigated the determinants of university innovation efficiency. However, the internal governance aspects of universities and their interactions with the external environment are frequently neglected. Therefore, this study, grounded in the framework of embeddedness theory, employed the Stochastic Frontier Analysis method to empirically analyze innovation efficiency in Chinese universities. The results indicated that competitive threats significantly improved university innovation efficiency, whereas bureaucracy and international openness exhibited adverse effects, which were alleviated in regions with greater marketization.