Diversity and innovation

ABSTRACT

Although the effect of culture on national innovation levels is well-established, previous literature assumes cultural homogeneity within a nation. In this article we analyse two aspects of diversity – ethnic and values – and their impact on national innovation output. We show that ethnic diversity or fractionalization and values diversity are distinct and while the former has a negative effect on innovation, the latter contributes positively. However, countries are bound to have both types of diversity. We find that countries that are ethnically homogenous but diverse in values orientation are the best innovators.

KEYWORDS:

• Ethnic diversity
• fractionalization
• values diversity
• innovation

JEL CLASSIFICATION:

• M14
• O3
• Z1

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Although Wilson (2012) study considered ethnic, linguistic and religious diversity, we focus only on the former as it has been considered the most significant among the three.

² First, we used the exploratory procedure of statistical package for the social sciences to explore the possible clustering solutions for each country. The procedure uses Bayesian information criterion or Akaike information criterion to determine the number of cluster(s) to be separated. Results showed that the optimal clustering solution varies across countries, ranging from 3 to 7 clusters. Next, we evaluated the quality of the 3-, 4-, 5-, 6- and 7-cluster solution for each country using the Silhouette coefficient. Clustering solutions with a Silhouette coefficient of 0.5 or above is indicative of highly separable clusters and acceptable solutions (Mooi and Sarstedt 2011). Using this criterion, only the 3-, 4-, 5- and 6-clustering solutions can be regarded as acceptable solutions for all countries. For each solution, we computed the probability that two randomly selected individuals that do NOT share the same set of beliefs and values will meet. We use the average of the four probabilities as an indicator of value diversity.