Cultural diversity, innovation and entrepreneurship: firm-level evidence from London

Neil Lee and Max Nathan

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: A growing body of research is making links between diversity and the economic performance of cities and regions. Most of the underlying mechanisms take place within firms, but only a handful of organization-level studies have been conducted. We contribute to this underexplored literature by using a unique sample of 7,600 firms to investigate links among cultural diversity, innovation, entrepreneurship, and sales strategies in London businesses between 2005 and 2007. London is one of the world's major cities, with a rich cultural diversity that is widely seen as a social and economic asset. Our data allowed us to distinguish owner/partner and wider workforce characteristics, identify migrant/minority-headed firms, and differentiate firms along multiple dimensions. The results, which are robust to most challenges, suggest a small but significant “diversity bonus” for all types of London firms. First, companies with diverse management are more likely to introduce new product innovations than are those with homogeneous “top teams.” Second, diversity is particularly important for reaching international markets and serving London's cosmopolitan population. Third, migrant status has positive links to entrepreneurship. Overall, the results provide some support for claims that diversity is an economic asset, as well as a social benefit.

Keywords: cultural diversity; innovation; entrepreneurship; management; immigration; economic development; diasporas; cities; London (search for similar items in EconPapers)
JEL-codes: N0 (search for similar items in EconPapers)
Date: 2013-07-02
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ino, nep-sbm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (95)

Published in Economic Geography, 2, July, 2013, 89(4), pp. 367-394. ISSN: 0013-0095

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Journal Article: Cultural Diversity, Innovation, and Entrepreneurship: Firm-level Evidence from London (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:52363

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