COVID-19 accelerated a decade-long shift to remote work by normalizing working from home on a large scale. Indeed, 75% of US employees in a 2021 survey reported a personal preference for working remotely at least one day per week, and studies estimate that 20% of US workdays will take place at home after the pandemic ends. Here we examine how this shift away from in-person interaction affects innovation, which relies on collaborative idea generation as the foundation of commercial and scientific progress. In a laboratory study and a field experiment across five countries (in Europe, the Middle East and South Asia), we show that videoconferencing inhibits the production of creative ideas. By contrast, when it comes to selecting which idea to pursue, we find no evidence that videoconferencing groups are less effective (and preliminary evidence that they may be more effective) than in-person groups. Departing from previous theories that focus on how oral and written technologies limit the synchronicity and extent of information exchanged, we find that our effects are driven by differences in the physical nature of videoconferencing and in-person interactions. Specifically, using eye-gaze and recall measures, as well as latent semantic analysis, we demonstrate that videoconferencing hampers idea generation because it focuses communicators on a screen, which prompts a narrower cognitive focus. Our results suggest that virtual interaction comes with a cognitive cost for creative idea generation.