This paper deals with firms’ R&D-operations and how they are influenced by geographical proximity to other firms and organizations and the firm’s technology. The paper discusses geographical proximity as geographical distance to business partners like customers and suppliers and to universities and other types of academic research institutes. The firm’s technology is analyzed in terms of either an incremental and gradual development in small step or a rapid and step-wise development. A model combining these two aspects are presented in the paper and subsequently applied on a sample of 37 high-technology firms in the Swedish region of Mälardalen. The paper concludes that both these two dimensions have an impact on the firms’ R&D-operations, depending on the firm’s size, age and industry.