The Impact of Cultural Diversity on Innovation: Evidence from Dutch Firm-Level Data

Ceren Ozgen, Peter Nijkamp and Jacques Poot

No 6000, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Due to the growth in international migration in recent decades, the workforce of firms in host countries has become considerably more diverse, both demographically and culturally. It is an important question for firms and for governments to ask whether there are some productivity-enhancing externalities gained from this growing diversity within firms. In recent years migration research has demonstrated positive economic impacts of cultural diversity on productivity and innovation at the regional level. However, there is a dearth of research on the links between innovation and migrant diversity at the firm level. In this paper we construct and analyse a unique linked employer-employee micro-dataset of 4582 firms, based on survey and administrative data obtained from Statistics Netherlands. Excluding firms in the hospitality industry and other industries that employ low-skilled migrants, we use the local number of restaurants with foreign cuisines and the historical presence of migrant communities as valid instruments of endogenous migrant settlement. We find that firms in which foreigners account for a relatively large share of employment are somewhat less innovative. However, there is strong evidence that firms that employ a more diverse foreign workforce are more innovative, particularly in terms of product innovations.

Keywords: Netherlands; innovation; cultural diversity; knowledge spillovers; immigration; linked employer-employee data (search for similar items in EconPapers)
JEL-codes: D22 F22 O31 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-10
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-ent, nep-eur, nep-ino, nep-mig, nep-sbm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Published - published in: IZA Journal of Migration 2013, 2:18

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Working Paper: The Impact of Cultural Diversity on Innovation: Evidence from Dutch Firm-Level Data (2011)
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