Spatial patterns of technology diffusion determine the capacity of regions and cities to compete in a global market. It is therefore, important to know in what way the local environment can contribute to the attraction of new technology to business locations and what factors differentiate in the support of the local environment in this process. The article will take its starting point in the knowledge capacity of cities. It will then discuss conventional theory on spatial diffusion and review some merits of this theory. Furthermore. a focused approach will be introduced by adopting a communication perspective on technology diffusion. This perspective allows for an exploration of potential barriers (and bridges) in the diffusion process. The article will then present new empirical results on the supportive role of the local environment in technology diffusion on the basis of a large sample of innovative companies in various European cities. Particular attention will be given to the role of the local institutes of higher' education and research. This article will conclude with some policy recommendations on an improved use of the local environment in advancing the competitiveness of innovative companies.