This research aims at understanding the link between formal networks and informal learning by means of a case study, investigating knowledge flows among small firms and the numerous supporting institutions that lie within a particular sector of the economy. We shall concentrate our attention on a backward area located in the south of Italy (i.e. the province of Foggia) where we will consider a group of 33 formal institutions which support organic food production and a group of 66 firms which are directly involved in the production of organic food. The research question is centred on the impact of informal interactions and the importance of geographical proximity in determining the knowledge flows among heterogeneous agents. We look at the impact of informal learning mechanisms upon the capability of these local institutions and firms to implement appropriate local development strategies. In other words, we investigate whether the geographical proximity of firms and institutions is generating an Industrial District (ID) kind of development.