Considering collaborative patent development, we provide micro-level evidence
for innovation through exchanges of differentiated knowledge. Knowledge
embodied in a patent is proxied by word pairs appearing in its abstract, while
novelty is measured by the frequency with which these word pairs have appeared
in past patents. Inventors are assumed to possess the knowledge associated with
patents in which they have previously participated. We find that collaboration
by inventors with more mutually differentiated knowledge sets is likely to
result in patents with higher novelty.