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Diversity in Innovation

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  • Paul A. Gompers
  • Sophie Q. Wang

Abstract

In this paper we document the patterns of labor market participation by women and ethnic minorities in venture capital firms and as founders of venture capital-backed startups. We show that from 1990-2016 women have been less than 10% of the entrepreneurial and venture capital labor pool, Hispanics have been around 2%, and African Americans have been less than 1%. This is despite the fact that all three groups have much higher representation in education programs that lead to careers in these sectors as well as having higher representation in other highly-compensated professions. Asians, on the other hand, have much higher representation in the venture capital and entrepreneurial sector than their overall percentages in the labor force. We explore potential supply side explanations including both education attainment as well as relevant prior job experience. We also explore the correlation between diversity and state-level variations. Finally, we discuss how these patterns are consistent with homophily-based hiring and homophily-induced information flows about career choices. We end the paper by discussing areas for future research.

Suggested Citation

  • Paul A. Gompers & Sophie Q. Wang, 2017. "Diversity in Innovation," NBER Working Papers 23082, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23082
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    References listed on IDEAS

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    1. Robert J. Barro, 2013. "Education and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 301-328, November.
    2. Barry T. Hirsch & David A. MacPherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
    3. Antoni Calv├│-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
    4. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-226, May.
    5. William R. Kerr & William F. Lincoln, 2010. "The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 473-508, July.
    6. Steven N. Kaplan & Josh Lerner, 2010. "It Ain't Broke: The Past, Present, and Future of Venture Capital," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(2), pages 36-47.
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    Cited by:

    1. Paul A. Gompers & Kevin Huang & Sophie Q. Wang, 2017. "Homophily in Entrepreneurial Team Formation," NBER Working Papers 23459, National Bureau of Economic Research, Inc.
    2. Paul A. Gompers & Sophie Q. Wang, 2017. "And the Children Shall Lead: Gender Diversity and Performance in Venture Capital," NBER Working Papers 23454, National Bureau of Economic Research, Inc.
    3. Paul A. Gompers & Sophie Q. Wang, 2017. "And the Children Shall Lead: Gender Diversity and Performance in Venture Capital," Harvard Business School Working Papers 17-103, Harvard Business School.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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