Cultural diversity and knowledge in explaining entrepreneurship in European cities

Small Business Economics, Jun 2019

This study establishes and empirically explores the relationship between knowledge, cultural diversity and various entrepreneurial outcomes across European cities in 2008–2010. We demonstrate that the mechanism of knowledge spillover entrepreneurship is contextual and contend that cultural diversity and knowledge have differential impact on entrepreneurial outcomes across cities and countries. Cities with high cultural diversity provide more opportunities for entrepreneurship in sectors where technology and knowledge play more important role. While in technology-based sectors, we observe a decline in employment, in cities where cultural diversity is moderately high, this effect is counteracted by an increase in demand for skilful labour that is more concentrated in culturally diverse contexts. Implications for regional and national policy makers and international entrepreneurs are offered.

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Cultural diversity and knowledge in explaining entrepreneurship in European cities

Small Business Economics pp 1–19 | Cite as Cultural diversity and knowledge in explaining entrepreneurship in European cities AuthorsAuthors and affiliations David B. AudretschMaksim BelitskiJulia Korosteleva Open Access Article First Online: 03 June 2019 170 Downloads Abstract This study establishes and empirically explores the relationship between knowledge, cultural diversity and various entrepreneurial outcomes across European cities in 2008–2010. We demonstrate that the mechanism of knowledge spillover entrepreneurship is contextual and contend that cultural diversity and knowledge have differential impact on entrepreneurial outcomes across cities and countries. Cities with high cultural diversity provide more opportunities for entrepreneurship in sectors where technology and knowledge play more important role. While in technology-based sectors, we observe a decline in employment, in cities where cultural diversity is moderately high, this effect is counteracted by an increase in demand for skilful labour that is more concentrated in culturally diverse contexts. Implications for regional and national policy makers and international entrepreneurs are offered. KeywordsCultural diversity Entrepreneurship Knowledge spillover Industry City  JEL classificationL25 O30 R10 I26  1 Introduction Economists and policy makers have long observed that regional success depends upon entrepreneurial activity (Audretsch 2007; Glaeser et al. 2010) which varies systematically across space (Delgado et al. 2010). As a result, the topic of the determinants of entrepreneurial dynamics across regions and countries has engaged a number of entrepreneurship, regional development and international business scholars. Despite the progress, most studies across countries continue to suffer from the major limitation—an assumption of cultural homogeneity within nations (Tung 2008). Given the growing cultural diversity within and across countries, regional variations can often be as significant as cross-country differences. Despite evidence of the macro-level factors (Agarwal et al. 2007; Delmar et al. 2011; Acs et al. 2014), mechanisms and contextual conditions under which cultural diversity and knowledge transfer support new ideas and productivity (Gomez-Mejia and Palich 1997; Van Wijk et al. 2008; Stahl et al. 2010; Spanjer and van Witteloostuijn 2017), there is still lack of a systemic analysis linking knowledge and diversity to entrepreneurial outcomes especially in the context of cross-city cross-country comparisons (Audretsch et al. 2015a; Dheer 2017). Cities have always had a privileged role as centres of culture and economic activity. Bigger, more diverse cities experience greater interactions among individuals from different cultures, where greater cultural diversity generates new entrepreneurial ideas and replaces inefficient entrepreneurial initiatives by productive ones (Cowen 2002). Thus, cities characterized by a high level of knowledge but also cultural diversity may form an ideal ecosystem to explore and commercialize entrepreneurial ideas. The rationale behind this approach is that culture is an integral structural attribute of any community and is powerful enough to establish boundary conditions on the impact of knowledge spillover entrepreneurship (Rauch et al. 2013; Kreiser et al. 2010; Leung et al. 2005). This mechanism has received limited attention in international business literature (Agarwal et al. 2010; Liu et al. 2010; Rauch et al. 2013). While there is a general consensus among academic scholars about the importance of high-skilled labour and knowledge-intensive industries for city growth (Glaeser et al. 2004; Audretsch et al. 2015a), there is a long-standing argument on the role of cultural diversity as a conduit of knowledge spillovers and creativity (Legrain 2006; Putnam 2007; Liu et al. 2010; Nathan 2012) earlier introduces within the knowledge spillovers theory of entrepreneurship (Audretsch et al. 2006). The incremental benefit it brings to business formation, job creation and start-up survival remains an open question (Qian 2013). The overall economic growth benefits across cities may vary depending on a combination of knowledge embedded in the industry, diversity of skills and experiences (Spanjer and van Witteloostuijn 2017) and cultural diversity embodied in city communities (Nathan 2012; Audretsch et al. 2010). Firms in knowledge-intensive industries that are located in culturally diverse areas and able to employ people with diverse backgrounds may grow faster, but they also tend to develop a great deal of complexity and uncertainty as a result of cultural diversity (Robertson and Swan 2003). The mechanism via which geographically localized knowledge and cultural diversity impacts entrepreneurial dynamics in an international setting has become an important question in strategic international entrepreneurship (Hitt et al. 2002; Agarwal et al. 2007, 2010) and region (...truncated)


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David B. Audretsch, Maksim Belitski, Julia Korosteleva. Cultural diversity and knowledge in explaining entrepreneurship in European cities, Small Business Economics, 2019, pp. 1-19, DOI: 10.1007/s11187-019-00191-4