Does cultural diversity boost innovation?

The increasing international mobility of labour has important effects on the workforce composition of firms in all migrant-receiving countries. The consequences of these changes for firm performance have attracted growing attention in recent years. In this lecture Jacques Poot will focus explicitly on the impact of cultural diversity among employees on the innovativeness of firms.

Professor Poot will start by asking the question of how diversity should be measured and show that it matters for the conclusions drawn regarding the relationship. He will then provide a brief synthesis of empirical evidence from a wide range of contexts across Australasia, North America, the United Kingdom and continental Europe. This is followed by the discussion of some findings from his recent research that utilizes two unique and harmonized linked employer-employee datasets from the Netherlands and Germany.

The panel datasets contain detailed information on the generation of new products and services, determinants of innovation success and the composition of employment in firms over the period 1999 to 2006. The research shows that firms that employ a more culturally diverse foreign workforce are more innovative, but the impact – relative to other factors influencing innovation – is quantitatively modest. Moreover, Professor Poot will show that the causal direction of the relationship between innovation and cultural diversity is hard to detect, as there is certainly also evidence that more innovative firms recruit more culturally diverse workers.