Innovation, particularly in a dynamic environment, is crucial to a firm’s competitiveness. We test the hypothesis that managers’ performance, particularly their innovativeness, is related to the diversity of knowledge to which they are exposed in their interactions with colleagues. In a study of 106 managers in a high technology company, we find their performance benefits from increasing diversity of knowledge among their contacts. However, the effect of knowledge heterogeneity depends on the presence of sparse local networks. The joint influence of heterogeneity and sparse network structure is stronger for managerial innovation than for a more general measure of managerial performance. This suggests that the link between knowledge heterogeneity and performance relies on a process of knowledge synthesis involved in the generation of new ideas, with sparse networks affording managers the local autonomy needed for their development and implementation.