Discusses U.S.-Japanese competitiveness and how it might affect policy and the high-technology industry. Describes Japanese knowledge and spatial networks with a focus on their contribution to innovations. Discusses previous studies on the high-tech industry, highlighting the strengths and weaknesses of different criteria used to classify firms as high-tech firms. Discusses an analysis of employment trends in the main high-tech regions in the U.S. Applies a new classification of high-tech establishments for study and presents the results from an empirical analysis of the contribution of knowledge networks and spatial proximity to the innovation performance of high-tech firms in Texas. Argues that policies designed to enhance regional development through innovation should take into account whether local or non-local knowledge linkages are more significant for innovation.