The impact of ethnic diversity on a nation’s innovation

A study in Applied Economics Letters takes a fresh look at the dynamic between a nation’s ethnic and values diversity, and its innovation output.

To understand how well the 63 countries they studied innovated, authors Bala Ramasamy and Matthew C. H. Yeung combined information from the 2014 Global Innovation Index – on key factors such as knowledge creation, online creativity and knowledge diffusion – with other data like GDP, openness to trade, military spending and education levels. To gain an understanding of the values shared – or not – in the same countries, the pair made use of two sets of data from the World Value Survey.  

When all of their calculations were complete, Ramasamy and Yeung concluded that ethnic diversity has a negative impact on innovation output. “At the macro level this may imply strains involved in the provision of public goods while at the individual level it may imply lack of trust between groups,” they write.

Diversity in values, on the other hand, is good for innovation. “Values diversity contributes positively to innovation output indicating that differences in mindsets, beliefs and attitudes contribute towards better problem solving and creativity.”

Naturally, there’s also interplay between the two types of diversity. A higher level of values diversity worsens the already negative impact of having an ethnically diverse population on innovation; conversely, higher values diversity has a positive effect on innovation in societies that are less ethnically diverse.

So what’s the best balance – and has any country got it right? “Ideally, a country that is ethnically homogenous but diverse in values is the best combination for innovation,” they conclude. “Countries like South Korea and Sweden fall into this category.”

Their final thought, however – that “uniting different groups in ethnically diverse countries such that their value orientations are more similar could have beneficial outcomes” – is likelier much more easily said than done, no matter what the benefits for innovation – and national harmony.

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