Authors: Christian R. Østergaard,  Bram Timmermans and Kari Kristinsson.

UPDATE (April 2009): Submitted to Research Policy

UPDATE (August 2009): As from today the paper, co-authored with Christian R. Østergaard and Kari Kristinsson, is availabe as a DRUID working paper under the title: Beyond Technological Diversification: The Impact of Employee Diversity on Innovation. Feel free to download the document by clicking here.

This paper uses combines the Danish Integrated Database for Labor Market Research (IDA) and the DISKO4 technology and innovation survey to analyse the effect of a diverse composition of firms on the likelihood to innovate. A firm’s innovative competence is connected to its ability to utilize its resources. How firms leverage their knowledge resources to increase innovative compentence still remains is an area open for more research. Some literature suggests that for firms to develop innovative competence they must maintain knowledge in a diverse range of technologies when searching for complentarities or novel solutions. As a critical part of the knowledge and skills needed for innovation resides with and is used by individuals, one promising line of inquire into firms innovative competences could be to focus on the employees composition and the diversity of knowledge, skills and cognitive frameworks available.

Thus, quite intuitively, one source of innovative competence could be employee diversity. Employee diversity might create a broader search space and make the firm more open towards new ideas and creativity. As innovation is an interactive process that often involves communication and interaction among several employees in a firm and draws on their different qualities from all levels of the organisation, The scope of knowledge and skills that management can draw upon for problem solving and opportunity identification could be an important parameter of an innovative competence.

Our analysis on 1648 Danish firms indicate that there is indeed a positive effect of employee diversity on the likelihood of a firm to innovate. However, lots of oppurtuntities are open for further studies in this field.