The study of city relations and the concept of network analysis have been a major focus in urban and economic geography for decades. Yet, we are still facing many contemporary research challenges on questions regarding the network structures defined by theoretical economic rationale and their implications in the outcomes of knowledge diffusion. In particular, the ever-changing high-tech manufacturing activities continue to challenge the deepening of our understanding of current theories and to advance new theoretical frameworks. Therefore, this dissertation pursues three objectives: the first is to contribute to empirically validate the theoretical conjecture on the notion of city network with consideration of economic rationale. The second is to empirically measure the advantages cities achieve from networking behavior by building a conceptual framework with related schools of thought on innovation and knowledge creation. The third is to advance the new theory of location choice in the era of knowledge-based economy. The main conclusions are three-fold: first, we find the structure of the high-tech city network is consistent with both the complementarity network and the synergy network with a hybrid national core-periphery structure. Second, we find that knowledge diffusion along the organizational network has significant impacts on both innovation and production. However, the effects and strengths are strikingly different for the two high-tech sectors under study. Third, our findings are consistent with the hypothesis that human capital or talent has become the primary determinant of location choice of high-skilled multinational corporations in a knowledge-intensive economy, thus contributing to the advancement of a new location choice theory.