Varying Serendipity Between Inventors

Abstract

I explore the effect of chance encounters on innovation. To do so, I introduce the use of local flu prevalence as an exogenous influence on chance encounters during the knowledge-seeking process of inventors. I argue that a social avoidance response to a disease epidemic – a phenomenon well-established in epidemiology literature – decreases the likelihood of chance encounters between geographically proximate people. I establish and validate a measure of local flu prevalence during inventive search as proxy for lower potential chance encounters affecting an innovation. I predict and find that collaborations that are more influenced by chance encounters result in more novel re-combinations of knowledge because “serendipitous” knowledge from chance encounters is less constrained by the tendency toward local, exploitative search. During times with fewer chance encounters, inventors substitute where they get knowledge, more often turning to prior contacts and, therefore, limit recombination potential.

Keywords: chance encounters, inventive search, innovation

JEL Classification: O32, O31, L29, I12