Firms’ knowledge search and local knowledge externalities in innovation performance

•We explore firm-level and local area openness externalities on firms’ innovation performance.•Strong effects of both interactive collaboration and non-interactive contacts such as demonstration effects or copying.•Strong positive externalities of openness resulting from the intensity of local interactive knowledge search.•But also strong negative externalities resulting from the intensity of local non-interactive knowledge search.•Results provide support for local initiatives to support innovation partnering and counter illegal copying.