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

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Author Info

  • Ozgen, Ceren

    ()
    (VU University Amsterdam)

  • Nijkamp, Peter

    ()
    (VU University Amsterdam)

  • Poot, Jacques

    ()
    (University of Waikato)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6000.

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Length: 33 pages
Date of creation: Oct 2011
Date of revision:
Publication status: published in: IZA Journal of Migration 2013, 2:18
Handle: RePEc:iza:izadps:dp6000

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Keywords: Netherlands; innovation; cultural diversity; knowledge spillovers; immigration; linked employer-employee data;

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References

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  1. Alessandra Faggian & Philip McCann, 2009. "Human capital, graduate migration and innovation in British regions," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 33(2), pages 317-333, March.
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  24. Andrea Caragliu & Peter Nijkamp, 2008. "The Impact of Regional Absorptive Capacity on Spatial Knowledge Spillovers," Tinbergen Institute Discussion Papers, Tinbergen Institute 08-119/3, Tinbergen Institute.
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Citations

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Cited by:
  1. Max Nathan, 2013. "Top Team Demographics, Innovation And Business Performance: Findings From English Firms And Cities, 2008-9," ERSA conference papers ersa13p69, European Regional Science Association.
  2. Stephan Brunow & Valentina Nafts, 2013. "What types of firms tend to be more innovative: A study on Germany," Norface Discussion Paper Series, Norface Research Programme on Migration, Department of Economics, University College London 2013021, Norface Research Programme on Migration, Department of Economics, University College London.
  3. Neil Lee, 2013. "Cultural Diversity, Cities and Innovation: firm Effects or City Effects?," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0144, Spatial Economics Research Centre, LSE.
  4. Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2012. "Cultural Diversity and Plant‐Level Productivity," IZA Discussion Papers 6845, Institute for the Study of Labor (IZA).
  5. Hoogendoorn, Sander M. & van Praag, Mirjam C., 2012. "Ethnic Diversity and Team Performance: A Field Experiment," IZA Discussion Papers 6731, Institute for the Study of Labor (IZA).
  6. Ozgen, Ceren & Nijkamp, Peter & Poot, Jacques, 2013. "Measuring Cultural Diversity and its Impact on Innovation: Longitudinal Evidence from Dutch Firms," IZA Discussion Papers 7129, Institute for the Study of Labor (IZA).
  7. Andrea Caragliu & Chiara Del Bo & Henri Groot & Gert-Jan Linders, 2013. "Cultural determinants of migration," The Annals of Regional Science, Springer, Springer, vol. 51(1), pages 7-32, August.
  8. Stephan Brunow & Bastian Stockinger, 2013. "Establishments' and Regions' Cultural Diversity as a Source of Innovation: Evidence from Germany," Norface Discussion Paper Series, Norface Research Programme on Migration, Department of Economics, University College London 2013022, Norface Research Programme on Migration, Department of Economics, University College London.
  9. Thomas Kemeny, 2013. "Immigrant Diversity and Economic Development in Cities: A Critical Review," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0149, Spatial Economics Research Centre, LSE.
  10. Dr Max Nathan, 2013. "The Wider Economic Impacts Of High-Skilled Migrants: A Survey Of The Literature," NIESR Discussion Papers, National Institute of Economic and Social Research 11607, National Institute of Economic and Social Research.
  11. Stephan Brunow & Peter Nijkamp, 2012. "The Impact of a Culturally Diverse Workforce on Firms' Market Size: An Empirical Investigation on Germany," Tinbergen Institute Discussion Papers, Tinbergen Institute 12-082/3, Tinbergen Institute.
  12. Georgiadis, Andreas & Manning, Alan, 2013. "One nation under a groove? Understanding national identity," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 93(C), pages 166-185.
  13. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series, Norface Research Programme on Migration, Department of Economics, University College London 2013012, Norface Research Programme on Migration, Department of Economics, University College London.

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