Cultural diversity and innovation-oriented entrepreneurship

Paula Prenzel, Niels Bosma, Veronique Schutjens and Erik Stam

No 2205, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: A growing empirical literature has established a positive relationship between cultural diversity and entrepreneurship rates, often attributing this effect to innovative benefits of diversity. However, not all entrepreneurship is inherently innovative, raising the question of whether cultural diversity may increase the relative prevalence of entrepreneurs pursuing innovative instead of more replicative strategies. This study investigates the relationship between regional cultural diversity and the innovation-orientation of early-stage entrepreneurs and considers moderating factors by decomposing shares of foreign-born population by origin within and outside of the EU and by education level. Combining survey data from the Global Entrepreneurship Monitor with various measures of cultural diversity, we carry out a multilevel analysis for 166 European regions. The results suggest that entrepreneurs in more culturally diverse regions are significantly more likely to exhibit innovation-orientation. We find some evidence that this effect is supported by cognitive proximity as the share of EU-born foreign population is driving this result. Moreover, our analysis suggests that the effect of cultural diversity on innovative entrepreneurship is not due to human capital availability or moderated by entrepreneurs' absorptive capacity but rather stems from the diversity in cultural background itself.

Keywords: cultural diversity; entrepreneurship; innovation; European regions; multilevel analysis (search for similar items in EconPapers)
JEL-codes: F22 L26 O30 R1 (search for similar items in EconPapers)
Date: 2022-02, Revised 2022-02
New Economics Papers: this item is included in nep-cse, nep-cul, nep-cwa, nep-ent, nep-eur, nep-geo, nep-gro, nep-ino, nep-mig, nep-sbm, nep-tid and nep-ure
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