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Journal article
Ethnic diversity and business performance: Which firms? Which cities?
Max Nathan
December 2016
Paper No' :

Tags: business performance; cities; diversity; ethnic diversity; firm-level analysis

A growing literature examines how ethnic diversity influences economic outcomes in cities and inside firms. However, firm–city interactions remain more or less unexplored. Ethnic diversity may help firm performance by introducing a wider range of ideas, improving scrutiny or improving international market access. Urban locations may amplify in-firm processes via agglomeration economies, externalities from urban demography or both. These firm–city effects may be more beneficial for knowledge-intensive firms, and for young firms with a greater dependence on their environment. However, firm–city interactions could be negative for cost and competition-sensitive younger firms, or for firms operating in poorer, segregated urban markets. I deploy English cross-sectional data to explore these issues within firms’ ‘top teams’, using latent class analysis to tackle firm-level heterogeneity. I find positive diversity–performance links for larger, knowledge-intensive firms, and positive firm–city interactions both for larger, knowledge-intensive firms in London and for younger, smaller firms in second-tier metros. © 2016, © The Author(s) 2016.