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SERC/Urban and Spatial Programme Discussion Paper

Does Cultural Diversity Help Innovation in Cities: Evidence from London Firms


London is one of the world’s major cities, and one of its most diverse. London’s cultural diversity is widely seen as a social asset, but there is little hard evidence on its importance for the city’s businesses. Theory and evidence suggest various links between urban cultural diversity and innovation, at individual, firm and urban level. This paper uses a sample of 7,400 firms to investigate, exploiting the natural experiment of A8 accession. The results, which are robust to most endogeneity challenges, suggest there is a small but significant ‘diversity bonus’ for London firms. Diverse management teams are particularly important for ideas generation, reaching international markets and serving London’s cosmopolitan population.


Neil Lee and Max Nathan

February 2011     Paper Number SERCDP0069

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This SERC/Urban and Spatial Programme Discussion Paper is published under the centre's Urban programme.