Journal of Population Economics

, Volume 27, Issue 2, pp 303–364 | Cite as

The nexus between labor diversity and firm’s innovation

  • Pierpaolo Parrotta
  • Dario Pozzoli
  • Mariola PytlikovaEmail author
Original Paper


In this paper, we investigate the nexus between firm labor diversity and innovation by using data on patent applications filed by firms at the European Patent Office and a linked employer–employee database from Denmark. Exploiting the information retrieved from these comprehensive data sets and implementing proper instrumental variable strategies, we estimate the contribution of workers’ diversity in cultural background, education and demographic characteristics to valuable firm’s innovation activity. Specifically, we find evidence supporting the hypothesis that ethnic diversity may facilitate firms’ patenting activity in several ways by (a) increasing the propensity to (apply for a) patent, (b) increasing the overall number of patent applications, and (c) by enlarging the breadth of patenting technological fields, conditional on patenting. Several robustness checks corroborate the main findings.


Labor diversity Ethnic diversity Patenting activity Extensive and intensive margins 

JEL Classifications

J15 J16 J24 J61 J82 O32 



We thank Guglielmo Barone, Tor Eriksson, Hideo Owan, Pekka Ilmakunnas, Michael Rosholm, Chad Syverson, and Mns Soderbom (alphabetical order) for helpful suggestions. In addition, we appreciate comments from participants at seminars organized by the Copenhagen Business School, University of Bergamo, Aarhus School of Business, University of Lausanne; and from participants at the following conferences: ESPE 2010, The 5th Nordic Summer Institute in Labor Economics, The 2010 Ratio Young Scientist Colloquium, ESEM 2010, CAED/COST 2010 in London, the 2010 International Symposium on Contemporary Labor Economics at WISE, Xiamen, and EALE 2011 in Paphos. We also thank Ulrich Kaiser and Cedric Schneider for graciously providing us the data on patent applications. Pierpaolo Parrotta acknowledges the financial support from the Swiss National Centre of Competence in Research LIVES and Graduate School for Integration, Production and Welfare. Mariola Pytlikova gratefully acknowledges funding from the NORFACE programme on “Migration in Europe—Social, Economic, Cultural and Policy Dynamics” (project MI3, “Migration: Integration, Impact and Interaction”) and funding from the Czech Science Foundation (project No. 402/11/2464 “Measuring Discrimination by Gender”). The usual disclaimer applies.


  1. Adsera A, Pytlikova M (2012) The role of language in shaping international migration: evidence from OECD Countries 1985–2006. IZA Discussion Paper 6333. IZA Institute for the Study of Labour, BonnGoogle Scholar
  2. Alcacer J, Chung W (2010) Location strategies for agglomeration economies. HBS working paper 10–071. Harvard Business School, BostonGoogle Scholar
  3. Andersen AK (2000) Commuting areas in Denmark. AKF working paper. AKF, CopenhagenGoogle Scholar
  4. Audretsch DB, Feldman MP (1996) R&D spillovers and the geography of innovation and production. Am Econ Rev 86(3):630–640Google Scholar
  5. Adams JD (1990) Fundamental stocks of knowledge and productivity growth. J Polit Econ 98:673–03CrossRefGoogle Scholar
  6. Adams JD, Jaffe A (1996) Bounding the effects of R&D: an investigation using linked establishment and firm data. RAND J Econ 98:673–02Google Scholar
  7. Anderson R, Quigley JM, Wilhelmsson M (2005) Agglomeration and the spatial distribution of creativity. Pap Reg Sci 83:445–464CrossRefGoogle Scholar
  8. Archibugi D, Pianta M (1996) Measuring technological change through patents and innovation surveys. Technovation 16:451–519CrossRefGoogle Scholar
  9. Bantel KA, Jackson SE (1989) Top management and innovations in banking: does the composition of the top team make a difference? Strateg Manag J 10:107–124CrossRefGoogle Scholar
  10. Basset-Jones N (2005) The paradox of diversity management, creativity and innovation. Creat Innov Manag 14:169–175CrossRefGoogle Scholar
  11. Becker GS (1957) The economics of discrimination. University of Chicago Press, ChicagoGoogle Scholar
  12. Berliant M, Fujita M (2011) The dynamics of knowledge diversity and economic growth. South Econ J 77:856–884CrossRefGoogle Scholar
  13. Bloom N, Van Reenen J (2002) Patents, real options and firm performance. Econ J 112:97–116CrossRefGoogle Scholar
  14. Blundell R, Griffith R, Van Reenen J (1995) Dynamic count data models of technological innovation. Econ J 105:333–344CrossRefGoogle Scholar
  15. Blundell R, Griffith R, Van Reenen J (1999) Market share, market value and innovation in a panel of british manufacturing firms. Rev Econ Stud 66:529–554CrossRefGoogle Scholar
  16. Blundell R, Griffith R, Windmeijer F (2002) Individual effects and dynamics in count data models. J Econom 108:113–131CrossRefGoogle Scholar
  17. Card D (2001) Immigrant inflows, native outflows, and the local labor market impacts of higher immigration. J Labor Econ 19(1):22–64CrossRefGoogle Scholar
  18. Card D, DiNardo JE (2000) Do immigrant inflows lead to native outflows? Am Econ Rev Pap Proced 90:360–367CrossRefGoogle Scholar
  19. Cortes P (2008) The effect of low-skilled immigration on U.S. prices: evidence from CPI data. J. Polit Econ 116(3):381–22CrossRefGoogle Scholar
  20. Cohen WM, Levinthal DA (1990) Absorptive capacity: a new perspective on learning and innovation. Adm Sci Q 5:128–152CrossRefGoogle Scholar
  21. Damm AP (2009) Ethnic enclaves and immigrant labor market outcomes: quasi-experimental evidence. J Labor Econ 27(2):281–14CrossRefGoogle Scholar
  22. Dawson J (2012) Measurement of work group diversity. PhD Thesis. Aston University, Birminghan. Accessed 2012Google Scholar
  23. Deding M, Filges T, Van Ommeren J (2009) Spatial mobility and commuting: the case of two-earner households. J Reg Sci 49:113–147CrossRefGoogle Scholar
  24. Delgado M, Porter M, Stern S (2010) Clusters and entrepreneurship. J Econ Geogr 10:495–418CrossRefGoogle Scholar
  25. Drach-Zahavy A, Somech A (2001) Understanding team innovation: the role of team processes and structures. Group Dyn Theory Res Pract 5(2):111–123CrossRefGoogle Scholar
  26. Dustmann C, Fabbri F, Preston I (2005) The impact of immigration on the British labour market. Econ J 115(507):F324–F341CrossRefGoogle Scholar
  27. European Commission (2005) The business case for diversity: good practices in the workplace. Brussels, Accessed 2010
  28. Feldman MP, Audretsch DB (1999) Innovation in cities: science-based diversity, specialization and localized competition. Eur Econ Rev 43:409–429CrossRefGoogle Scholar
  29. Flaig G, Stadler M (1994) Success breeds success. The dynamics of the innovation process. Empir Econ 19:55–68CrossRefGoogle Scholar
  30. Foley CF, Kerr WR (2013) Ethnic innovation and US multinational firm activity. Management Science (forthcoming)Google Scholar
  31. Frederiksen A, Kato T (2011) Human capital and career success: evidence from linked employer-employee data. IZA Discussion Papers 5764. IZA Institute for the Study of Labour, BonnGoogle Scholar
  32. Griliches Z (1990) Patent statistics as economic indicators: a survey. J Econ Lit 28:1661–07Google Scholar
  33. Griliches Z (1990) Patent statistics as economic indicators: a survey. J Econ Lit 28:1661–07Google Scholar
  34. Guiso L, Sapienza P, Zingales L (2009) Cultural biases in economic exchange? Q J Econ 124:1095–1131CrossRefGoogle Scholar
  35. Hall BH, Jaffe A, Trajtenberg M (2005) Market value and patent citations. Rand J Econ 36:16–38Google Scholar
  36. Harrison DA, Klein KJ (2007) What’s the difference? Diversity constructs as separation, variety, or disparity in organizations. Acad Manag Rev 32:1199–28CrossRefGoogle Scholar
  37. Hatzigeorgiou A, Lodefalk M (2011) Trade and migration: firm-level evidence. Department of Economics Working paper. Lund University, LundGoogle Scholar
  38. Hiller S (2013) Does immigrant employment matter for export sales? Evidence from Denmark. Review of World Economics 49:369–394CrossRefGoogle Scholar
  39. Hong L, Page SE (2001) Problem solving by heterogeneous agents. J Econ Theory 97(1):123–163CrossRefGoogle Scholar
  40. Hong L, Page SE (2004) Groups of diverse problem solvers can outperform groups of high-ability problem solvers. Proc Natl Acad Sci 101:123–139CrossRefGoogle Scholar
  41. Horwitz SK, Horwitz IB (2007) The effects of team diversity on team outcomes: a meta-analytic review of team demography. J Manag 33:987–15Google Scholar
  42. Jaffe AB (1986) Technological opportunity and spillovers of R&D. Am Econ Rev 76:984–01Google Scholar
  43. Jost L (2006) Entropy and diversity. Oikos 113:363–374CrossRefGoogle Scholar
  44. Kaiser U, Kongsted H, Rønde T (2008) Labor mobility and patenting activity. Centre for Economic and Business Research (CEBR), CopenhagenGoogle Scholar
  45. Kerr WR, Lincoln W (2010) The supply side of innovation: H-1B visa reforms and US ethnic invention. J Labor Econ 28:473–08CrossRefGoogle Scholar
  46. Kelley MR, Helper S (1999) Firm size and capabilities, regional agglomeration, and the adoption of new technology. Econ Innov New Technol 8:79–03CrossRefGoogle Scholar
  47. Knight D, Pearce CL, Smith KG, Olian JD, Sims HP, Smith KA, Flood P (1999) Top management team diversity, group process, and strategic consensus. J Strateg Manag 20:445–465CrossRefGoogle Scholar
  48. Krugman P (1991) Geography and trade. MIT, CambridgeGoogle Scholar
  49. Lanjouw JO, Pakes A, Putnam J (2003) How to count patents and value intellectual property: the uses of patent renewal and application data. J Ind Econ 46.4:405–432Google Scholar
  50. Lazear EP (1998) Personnel economics for managers. Wiley, New YorkGoogle Scholar
  51. Lazear EP (1999) Globalisation and the market for team-mates. Econ J 109:15–40CrossRefGoogle Scholar
  52. Maignan C, Ottaviano G, Pinelli D, Rullani F (2003) Bio-ecological diversity vs. socio-economic diversity: a comparison of existing measures. Fondazione Eni Enrico Mattei, Nota di Lavoro 13, MilanGoogle Scholar
  53. Montgomery JD (1991) Social networks and labor market outcomes: toward an economic analysis, vol 81Google Scholar
  54. Munshi K (2003) Networks in the modern economy: Mexican migrants in the US labor market. Q J Econ 118:549–599CrossRefGoogle Scholar
  55. Nathan M (2012) Same difference? Ethnic inventors, diversity and innovation in the UK. Mimeo London School of Economics and Spatial Economics Research CentreGoogle Scholar
  56. Niebuhr A (2010) Migration and innovation: does cultural diversity matter for regional R&D activity? Pap Reg Sci 89:563–585CrossRefGoogle Scholar
  57. OECD (2009) Policy responses to the Economic crisis. Investing in innovation for long-term growth. Paris, Accessed 2010
  58. OECD (2011) Innovation in the crisis and beyond. Paris, Accessed 2011
  59. Ortega F, Peri G (2009) The causes and effects of international migrations: evidence from OECD countries 1980–2005. Working paper 14833. National Bureau of Economic Research, CambridgeGoogle Scholar
  60. Osborne E (2000) The deceptively simple economics of workplace diversity, vol 21Google Scholar
  61. Ozgen C, Nijkamp P, Poot J (2011a) Immigration and innovation in European Regions. IZA discussion paper 5676. IZA Institute for the Study of Labour, BonnGoogle Scholar
  62. Ozgen C, Nijkamp P, Poot J (2011b) The impact of cultural diversity on innovation: evidence from Dutch firm-level data. IZA discussion paper 6000. IZA Institute for the Study of Labour, BonnGoogle Scholar
  63. Parrotta P, Pozzoli D, Pytlikova M (2011) Does labor diversity affect firm productivity? Migration discussion paper no. 2011-5, NORFACE, LondonGoogle Scholar
  64. Pedersen PJ, Pytlikova M, Smith N (2008) Selection and network effects—migration flows into OECD countries 1990–2000. Eur Econ Rev 52(7):1160–1186CrossRefGoogle Scholar
  65. Pitcher P, Smith AD (2001) Top management team heterogeneity: personality, power, and proxies. Organ Sci 12(1):1–18CrossRefGoogle Scholar
  66. Stock JH, Yogo M (2005) Testing for weak instruments in linear IV regression. In: Andrews DWK, Stock JH (eds) Identification and inference for econometric models: essays in honour of Thomas Rothenberg. Cambridge University Press, CambridgeGoogle Scholar
  67. Söllner R (2010) Human capital diversity and product innovation: a micro-level analysis. Jena economic research papers 2010–027. Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, JenaGoogle Scholar
  68. Trajtenberg M (1990) A penny for your quotes: patent citations and the value of innovations. Rand J Econ 21:172–187CrossRefGoogle Scholar
  69. Vuong QH (1984) Two-stage conditional maximum likelihood estimation of econometric models. Social science working paper 538. California Institute of Technology, PasadenaGoogle Scholar
  70. Wallsten SJ (2001) An empirical test of geographic knowledge spillovers using geographic information systems and firm-level data. Reg Sci Urban Econ 31(5):571–599CrossRefGoogle Scholar
  71. Watson WE, Kumar K, Michaelsen LK (1993) Cultural diversity’s impact on interaction process and performance: comparing homogeneous and diverse task groups. Acad Manag J 36(3):590–02CrossRefGoogle Scholar
  72. Williams KY, O’Reilly CAIII (1998) Demography and diversity in organizations: a review of 40 years of research. Res Organ Behav 20:77–40Google Scholar
  73. Østergaard CR, Timmermans B, Kristinsson K (2011) Does a different view create something new? The effect of employee diversity on innovation. Res Policy 40(3):500–509CrossRefGoogle Scholar
  74. Zajac E, Golden BR, Shortell SM (1991) New organizational forms for enhancing innovation: the case of internal corporate joint ventures. Manag Sci 37(2):170–184CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Pierpaolo Parrotta
    • 1
    • 2
  • Dario Pozzoli
    • 2
    • 3
    • 4
  • Mariola Pytlikova
    • 3
    • 5
    • 6
    Email author
  1. 1.University of LausanneLausanneSwitzerland
  2. 2.Aarhus UniversityAarhusDenmark
  3. 3.The Danish Institute for Regional Government Research (KORA)CopenhagenDenmark
  4. 4.IZABonnGermany
  5. 5.Faculty of EconomicsTechnical University of Ostrava (VŠB-TU)Ostrava 1Czech Republic
  6. 6.CReAMLondonUK

Personalised recommendations