In knowledge we trust: Learning-by-interacting and the productivity of inventors

Innovation rarely happens through the actions of a single person. Innovators source ideas while interacting with peers at different levels and intensities. With a dataset of disambiguated inventors from 1980 to 2010 in European metropolitan areas, we assess the influence of their interactions with co-workers, organizations' colleagues, and geographically co-located peers on their productivity. By adding many fixed effects to control for unobserved heterogeneity, we uncover the importance of metropolitan areas knowledge for inventors' productivity, with firms and co-workers' network knowledge being less relevant. When the complexity and quality of knowledge are accounted for, the picture changes: proximate, social interactions become central.