Does a different view create something new? The effect of employee diversity on innovation

A growing literature is analysing the relation between diversity in the knowledge base and the performance of firms; nevertheless, studies that investigate the impact of employee diversity on innovation are scarce. Innovation is an interactive process that often involves communication and interaction among employees in a firm and draws on their different qualities from all levels of the organisation. This paper investigates the relation between employee diversity and innovation in terms of gender, age, ethnicity, and education. The analyses draw on data from a recent innovation survey. This data is merged with a linked employer–employee dataset that allow us to identify the employee composition of each firm. We test the hypothesis that employee diversity is associated with better innovative performance. The econometric analysis reveals a positive relation between diversity in education and gender on the likelihood of introducing an innovation. Furthermore, we find a negative effect of age diversity and no significant effect of ethnicity on the firm's likelihood to innovate. In addition, the logistic regression reveals a positive relationship between an open culture towards diversity and innovative performance. We find no support of any curvilinear relation between diversity and innovation.

Research highlights▶ The link between employee diversity and firm's likelihood to innovate is analyzed. ▶ The study relies on a unique set of databases consisting of a large scale innovation survey and a detailed linked employer-employee database. ▶ Diversity measures are based on a broad set of individuals instead of only focusing on top management team. ▶ A positive relation is found between diversity in education and gender on innovation, providing evidence on the importance of a diverse knowledge base among employees.