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

  • Ozgen, Ceren

    ()

    (VU University Amsterdam)

  • Nijkamp, Peter

    ()

    (VU University Amsterdam)

  • Poot, Jacques

    ()

    (University of Waikato)

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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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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  1. William R. Kerr, 2009. "Breakthrough Inventions and Migrating Clusters of Innovation," NBER Working Papers 15443, National Bureau of Economic Research, Inc.
  2. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2010. "How Much Does Immigration Boost Innovation?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 31-56, April.
  3. Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2012. "Cultural Diversity and Plant‐Level Productivity," IZA Discussion Papers 6845, Institute for the Study of Labor (IZA).
  4. Annekatrin Niebuhr, 2006. "Migration and Innovation - Does Cultural Diversity Matter for Regional R&D Activity?," ERSA conference papers ersa06p31, European Regional Science Association.
  5. Ceren Ozgen & Peter Nijkamp & Jacques Poot, 2011. "Immigration And Innovation In European Regions," Norface Discussion Paper Series 2011008, Norface Research Programme on Migration, Department of Economics, University College London.
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  10. Charles I. Jones & Paul M. Romer, 2010. "The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 224-45, January.
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  13. William Kerr & William Lincoln, 2010. "The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention," William Davidson Institute Working Papers Series wp978, William Davidson Institute at the University of Michigan.
  14. Jacques Poot, 2007. "Demographic Change and Regional Competitiveness: The Effects of Immigration and Ageing," Population Studies Centre Discussion Papers dp-64, University of Waikato, Population Studies Centre.
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  27. Scott E. Page, 2007. "Prologue to The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies
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