Due to the increasing globalization of businesses, new ideas for innovation need to be disseminated rapidly both within and across different departments and divisions. Frequently, ideas and information are dispersed over globally distributed organizations or team members. As a result, the exchange of knowledge has become not only very important for innovation but also highly complex. To facilitate this knowledge exchange, electronically mediated interactions are growing rapidly, replacing traditional face-to-face communications. However, literature provides contradicting results regarding the effectiveness of computer-mediated communication (CMC) versus face-to-face communication. This study attempts to reconcile differences in the literature on the benefits of CMC technologies and co-location. Focusing on knowledge dissemination in technology development processes in high-technology firms, the study investigates the relative impact of CMC technologies and co-location of research and development (R&D) staff, as well as the mutual interaction between them. The present article hypothesizes that CMC technologies and co-location of R&D staff have a positive impact on knowledge dissemination. Further, it is hypothesized that it is more favorable to co-locate R&D staff than to invest in CMC technologies and that the effects of co-location and CMC interact negatively. These hypotheses are tested using empirical data collected from 277 high-technology firms in the United States, and the results are generalized by conducting the same test on data from 125 high-technology firms in the Netherlands. Tests are conducted in a real-world setting, differing from previous comparative studies that mainly used laboratory experiments. Empirical results support the main effects of CMC technologies and co-location of R&D staff on knowledge dissemination. Other empirical results contradict conventional wisdom. Investing in CMC technologies is found to be favorable over co-locating R&D staff for knowledge dissemination. Moreover, the two communication channels strengthen each other. The discussion section presents the contours of a firm-level theory on communication infrastructures and knowledge dissemination, focusing on the scope and the heterogeneity of knowledge dissemination, which may explain these initially surprising results. From the arguments it follows that the choice for investment in co-location or CMC technologies depends on the scope of knowledge dissemination that has to be facilitated. Furthermore, the conclusion is made that effective knowledge dissemination requires a balanced investment in co-location and information technologies to be able to deal with the heterogeneous but interdependent types of knowledge dissemination.