Cultural Diversity, Cities and Innovation: firm Effects or City Effects?
AbstractGrowing cultural diversity is seen as important for innovation. Research has focused on two potential mechanisms: a firm effect, with diversity at the firm level improving knowledge sourcing or ideas generation, and a city effect, where diverse cities helping firms innovate. This paper uses a dataset of over 2,000 UK SMEs to test between these two. Controlling for firm characteristics, city characteristics and firm and city diversity, there is strong evidence for the firm effect. Firms with a greater share of migrant owners or partners are more likely to introduce new products and processes. This effect has diminishing returns, suggesting that it is a 'diversity' effect rather than simply the benefits of migrant run firms. However, there is no relationship between the share of foreign workers in a local labour market and firm level innovation, nor do migrant-run firms in diverse cities appear particularly innovative. But urban context does matter and firms in London with more migrant owners and partners are more innovative than others.
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Bibliographic InfoPaper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0144.
Date of creation: Oct 2013
Date of revision:
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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp
Cultural diversity; innovation; cities; SMEs; migration;
Find related papers by JEL classification:
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-BEC-2013-10-18 (Business Economics)
- NEP-CUL-2013-10-18 (Cultural Economics)
- NEP-ENT-2013-10-18 (Entrepreneurship)
- NEP-EUR-2013-10-18 (Microeconomic European Issues)
- NEP-GEO-2013-10-18 (Economic Geography)
- NEP-INO-2013-10-18 (Innovation)
- NEP-KNM-2013-10-18 (Knowledge Management & Knowledge Economy)
- NEP-MIG-2013-10-18 (Economics of Human Migration)
- NEP-SBM-2013-10-18 (Small Business Management)
- NEP-URE-2013-10-18 (Urban & Real Estate Economics)
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