This dissertation aims to answer the main question of "How does regional ecology (few or many small innovative firms in a region) enhance or limit innovation?" Put differently, how vital is the mix of small and large firms for regional innovation performance? From the policy perspective, the results of this study shed some light for policy maker to assess the "knowledge searching" strategies of firms when choosing locations. The research design combines a unique survey of patent inventors in the United States and archival data. Georgia Tech inventor survey data contains commercialization measures for patented inventions and information on firm characteristics. Using this archival data, data has been collected on regional innovation measures, regional-level attributes and project-level measures. The results indicate that the agglomeration of specialized firms is positively associated with regional innovation activities, as the Marshall-Arrow-Romer model proposed. In addition to traditional regional measures, small firm dominated ecology is a strong factor explaining regional commercialization activities, even though the role is not very significant when explaining the regional patenting activities. It is suggested that the organizational ecological perspective is complementary to understand information flow mechanisms in innovative regions. One mechanism of SME dominated ecologies is partially through the increase of skilled labor mobility. Furthermore, when the regional ecology moves towards being dominated by small firms, large firms benefit more from the presence of many innovative small firms than SMEs. By contrast, the concentration of innovative small firms does not add much value for SMEs. I suggest the focus of policies should be on understanding the heterogeneous ability of accessing localized knowledge resources between large and small firms. Deriving from the findings, policy implications and future research are discussed.