| By: |
Paula Prenzel;
Niels Bosma;
Veronique Schutjens;
Erik Stam |
| Abstract: |
A growing empirical literature has established a positive relationship between
cultural diversity and entrepreneurship rates, often attributing this effect
to innovative benefits of diversity. However, not all entrepreneurship is
inherently innovative, raising the question of whether cultural diversity may
increase the relative prevalence of entrepreneurs pursuing innovative instead
of more replicative strategies. This study investigates the relationship
between regional cultural diversity and the innovation-orientation of
early-stage entrepreneurs and considers moderating factors by decomposing
shares of foreign-born population by origin within and outside of the EU and
by education level. Combining survey data from the Global Entrepreneurship
Monitor with various measures of cultural diversity, we carry out a multilevel
analysis for 166 European regions. The results suggest that entrepreneurs in
more culturally diverse regions are significantly more likely to exhibit
innovation-orientation. We find some evidence that this effect is supported by
cognitive proximity as the share of EU-born foreign population is driving this
result. Moreover, our analysis suggests that the effect of cultural diversity
on innovative entrepreneurship is not due to human capital availability or
moderated by entrepreneurs' absorptive capacity but rather stems from the
diversity in cultural background itself. |
| Keywords: |
cultural diversity, entrepreneurship, innovation, European regions, multilevel analysis |
| JEL: |
F22 L26 O30 R1 |
| Date: |
2022–02 |
| URL: |
http://d.repec.org/n?u=RePEc:egu:wpaper:2205&r= |