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Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data

  • Ceren Ozgen

    ()

    (Department of Spatial Economics, VU University Amsterdam and bTinbergen Institute, Amsterdam,)

  • Thomas de Graff

    ()

    (aDepartment of Spatial Economics, VU University Amsterdam)

An increasing amount of research in the migration literature shows a positive association between migrant diversity and rm productivity. However, the potential bias due to unobserved heterogeneity remains a challenge. In this paper we analyse the impact of cultural diversity on firm innovativeness, while using finite mixture modeling to control for observed and unobserved heterogeneity. Recent availability of microdata has enabled us to construct a linked employee- employer dataset through merging datasets on both workers and firms. We explore the possible ways of firm-level knowledge exchange among the employees with di fferent cultural backgrounds and its impact on fi rms' product and process innovations. We fi nd that workforce diversity is benefi cial for innovativeness in capital-intensive sectors. It also positively impacts large firms that operate in high-level services, manufacturing, mining and R&D sectors, that are predominantly located in the non-urban areas in the Netherlands. In labour and land intensive sectors, the impact of cultural diversity on innovativeness is inconclusive.

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Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2013012.

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Date of creation: Apr 2013
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Handle: RePEc:nor:wpaper:2013012
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