does cultural diversity of migrant employees affect innovation? vrije universiteit amsterdam imr 50...
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Does Cultural Diversity of Migrant Employees Affect Innovation?
VRIJEUNIVERSITEITAMSTERDAM
IMR 50th Anniversary SymposiumSeptember 30, 2014New York
Ceren Ozgen, VU University Amsterdam and EUICornelius Peters, IAB NordAnnekatrin Niebuhr, Christian-Albrechts UniversityPeter Nijkamp, VU University Amsterdam Jacques Poot, University of Waikato
Source: www.linkedin.com
2009-2013 PROJECT:MIGRANT DIVERSITY AND REGIONAL DISPARITY IN EUROPE (MIDI-REDIE)
Part of:NORFACE Research Programme on Migration
http://www.norface-migration.org/
MIDI-REDIE: Team Composition
Department of Spatial Economics, VU University Amsterdam, The Netherlands
Institute for Employment Research (IAB), Nuremberg, Germany
Institute for Social and Economic Research (ISER), University of Essex, UK
Labour Institute for Economic Research, Helsinki, Finland
Department of Economics, University of Tartu, Tartu, Estonia
MIDI-REDIE research on the impact of immigration on innovation
Key question: Does the presence of migrants from a diverse range of backgrounds in a region, or within a firm, boost innovation and productivity?
Various projects◦ Meta-analysis of empirical literature (productivity effect)◦ Pan-EU regional level (patents effect)◦ Linked employer-employee panel data (innovation effect)◦ Global macroeconomic panel data (productivity effect)
The IMR paper: ◦ Synthesis of existing literature◦ Comparative German-Dutch analysis with harmonized
data and (almost) identical modelling
Source: http://www.elegran.com/edge/2011/12/jane-jacobs-and-new-york-city-part-2
Positive and negative channels of diversity’s impact on innovation Positive
◦ Within the organisation Positive self-selection Knowledge spillovers and networks Enhanced decision-making and resilience Migrants reducing business constraints through filling vacancies
◦ Externalities Cultural diversity as an amenity Agglomeration benefits Benefits from the strength of weak ties and bridging social capital
Negative◦ Within the organisation
Fractionalization (affecting communication, trust, treatment, mobility) Greater labor intensity of production discourages adoption of new
technology
◦ Externalities Sorting and segregation Bonding social capital, potentially leading to polarization Fragmentation in representation
Measurement of cultural diversity
Cultural diversity refers to the extent of cultural differences among members within a social unit, i.e. it is a multidimensional concept
Indicators may include birthplace, ethnicity, race, language, ancestry, religion, etc.
The growing complexity of demographic composition in most cities is referred to as “superdiversity”
Common measures include the share of “foreigners”, the fractionalization index, the entropy index, the number of groups present (“cultural richness”)
The mathematical and statistical issues of measurement of diversity continue to attract considerable interest
A synthesis of the evidence to dateMajor differences between North-American and
European literaturesStrong evidence of spillover benefits from foreign
students and researchersOn balance, positive effects of cultural diversity
on patent applications and innovationCultural diversity matters, but is of relatively less
importance for innovation than e.g. business size and industry
Many studies are not able to adequately address the difficult issue of reverse causality: intrinsically innovative firms and regions may disproportionally recruit or attract workers from diverse backgrounds
Construction of harmonized Dutch and German datasets
Netherlands: Community Innovation Surveys
(CIS) Tax registers (SSB_Banen) Municipal registrations (GBA) Regional statistics from Statistics
Netherlands Data coverage: 2002 & 2006
Germany: IAB Establishment Panel (1% of all
establ. & 7% of all employees)
Establishment History Panel (BHP) IAB Employee History Panel (comes
from Fed Empl Agency’s social security registers)
Regional statistics from Federal Statistics Office
Data coverage: 2001 & 2004 & 2007
Panel of firms:
2 wave balanced panel of ~2800 firms for Dutch firms3 wave balanced panel of ~1012 firms for German firmsOnly private sector establishments
Some descriptive statistics
Mean (St. dev.)
The Netherlands Germany
Product innovation 0.250 (0.433) 0.442 (0.497)Fractionalization index 0.538 (0.295) 0.109 (0.234)Foreignness indicator 0.882 (0.321) 0.314 (0.464)Establishment size 171 (354) 123 (563)
Share of high-skilled 0.235 (0.165) 0.068 (0.137)Share of <25 years old 0.079 (0.090) 0.069 (0.103)Share of 25-45 years old 0.603 (0.137) 0.551 (0.188)Share of high skilled foreigners* 0.212 (0.247) 0.067 (0.209)Share of foreigners <25 years old* 0.062 (0.141) 0.075 (0.187)Share of foreigners 25-45 years old* 0.648 (0.265) 0.579 (0.352)
Observations 5586 3036
* Only establishments employing foreign workers
Results A coefficient of about 0.1 for the diversity effect
on innovation in both countries, but not statistically significantly in Germany
We can’t detect an effect of increasing diversity within firms over time, probably because the change in firm employment composition over 4-6 years is so small
Firm characteristics that drive innovation are the same in both countries
Skills matter – applies equally to migrants and natives
Addressing reverse causality It is difficult to conceive and implement “randomized trials” in this
context Econometricians therefore use instrumental variables (IV)
techniques that◦ Identify and use factors that can explain observed cultural diversity within
a firm◦ But these factors should have no direct link with a firm’s innovation
Firms are expected to mostly employ people from their own vicinity, so IV reflect this:◦ For the Netherlands: the number of unique countries of birth in the
municipality where the firm is located◦ For Germany: the average cultural diversity in similar firms in other
regions With this technique, the impact is now statistically significant and
even larger in Germany (coefficient 0.4), but no longer in the Netherlands
ConclusionsFirm size, sector, location and staff skills matter
most for innovation There is a small positive effect of cultural diversity,
but to quantify it remains challengingReplication across a wider range of countries is
desirableCross-disciplinary integration of team diversity and
innovation studies could be fruitful◦ Consider organizational structures, institutional settings,
types of tasks, etc.This could help to identify the specific “channels”
of impacts of cultural diversity on innovation In turn, this may assist in designing effective
policy responses
http://blogs.sap.com/innovation/human-resources/how-to-effectively-create-workplace-diversity-01242727
Thank You!