Knowledge has become a primary source of competitiveness, and knowledge workers, people whose jobs require formal and advanced schooling, are one of the fastest growing groups in workforce. With the rise of a knowledge-based economy, higher education has been increasingly emphasized in economic development. Colleges and universities have recently added translation of research into products and new enterprises to their educational functions while companies have increased their external links to keep pace with rapidly changing and increasingly complex business environments. These changes have strengthened the role of colleges and universities in industrial innovation which is a key to economic development. This research reviews characteristics of U.S. higher education and development of interactions between higher education institutions and companies in the U.S. The case of IT industries, where U.S. has a competitive edge, provides specific examples and implications. Four major routes of interactions between higher education institutions and companies are suggested to provide a research framework for future studies in this area.