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Does cultural diversity help innovation in cities: evidence from London firms

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  • Lee, Neil
  • Nathan, Max

Abstract

London is one of the world’s major cities, and one of its most diverse. London’s cultural diversity is widely seen as a social asset, but there is little hard evidence on its importance for the city’s businesses. Theory and evidence suggest various links between urban cultural diversity and innovation, at individual, firm and urban level. This paper uses a sample of 7,400 firms to investigate, exploiting the natural experiment of A8 accession. The results, which are robust to most endogeneity challenges, suggest there is a small but significant ‘diversity bonus’ for London firms. Diverse management teams are particularly important for ideas generation, reaching international markets and serving London’s cosmopolitan population.

Suggested Citation

  • Lee, Neil & Nathan, Max, 2011. "Does cultural diversity help innovation in cities: evidence from London firms," LSE Research Online Documents on Economics 33579, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:33579
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    File URL: http://eprints.lse.ac.uk/33579/
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Diversity trumps ability
      by chris dillow in Stumbling and Mumbling on 2014-10-17 17:53:54

    Citations

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    Cited by:

    1. Emanuela Marrocu & Raffaele Paci, 2011. "Education or just Creativity: what matters most for economic performance?," ERSA conference papers ersa11p199, European Regional Science Association.
    2. Keith McLeod & Richard Fabling & David C. Maré, 2014. "Hiring New Ideas: International Migration and Firm Innovation in New Zealand," Working Papers 14_14, Motu Economic and Public Policy Research.
    3. 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).
    4. Neil Lee & Andrés Rodríguez-Pose, 2013. "Original Innovation, Learnt Innovation and Cities: Evidence from UK SMEs," Urban Studies, Urban Studies Journal Limited, vol. 50(9), pages 1742-1759, July.
    5. Stephan Brunow & Valentina Nafts, 2013. "What types of firms tend to be more innovative: A study on Germany," Norface Discussion Paper Series 2013021, Norface Research Programme on Migration, Department of Economics, University College London.
    6. Max Nathan, 2011. "Ethnic Inventors, Diversity and Innovation in the UK: Evidence from Patents Microdata," SERC Discussion Papers 0092, Spatial Economics Research Centre, LSE.
    7. Neil Lee & Andrés Rodríguez-Pose, 2014. "Creativity, Cities, and Innovation," Environment and Planning A, , vol. 46(5), pages 1139-1159, May.
    8. Lee, Neil, 2011. "Free to grow? Assessing the barriers faced by actual and potential high growth firms," MPRA Paper 36396, University Library of Munich, Germany.
    9. Julie Fry, 2014. "Migration and Macroeconomic Performance in New Zealand: Theory and Evidence," Treasury Working Paper Series 14/10, New Zealand Treasury.

    More about this item

    Keywords

    cities; innovation; entrepreneurship; cultural diversity; migration; London;

    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; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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