Does labor diversity promote entrepreneurship?

We find evidence that workforce educational diversity promotes entrepreneurial behavior of employees as well as the formation of new firms, whereas diversity in demographics hinders transitions to self-employment. Ethnic diversity favors entrepreneurship in financial and business services.

► Diversity in cultural background and education favors transitions to self-employment. ► These transitions are lowered by higher degrees of demographic heterogeneity. ► Educational diversity seems to foster firm formation.