Knowledge and cultural diversity in entrepreneurship: untangling the relationship

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This study investigates the role of cultural diversity and local knowledge stocks for entrepreneurship, focusing on the interplay between the two. We consider the Italian case, where immigration is comparatively low-skilled and originating largely from less advanced economies. Focusing separately on high-tech and low-tech entrepreneurship, we document the coexistence of heterogeneous effects of diversity for entrepreneurship. We find that cultural diversity promotes high-tech entrepreneurship only by high levels of knowledge stocks. In contrast, cultural diversity has a direct, positive effect on low-tech entrepreneurship that is negatively moderated by knowledge. We interpret these findings as the result of two different effects of diversity: diversity promotes high-tech entrepreneurship providing heterogeneous perspectives and evaluations of business opportunities; at the same time, it increases taste heterogeneity, offering low-tech business opportunities to necessity entrepreneurs which become less and less appealing as the knowledge stock of the region increases.