Cultural Diversity Stimulates Entrepreneurship: Evidence from Two Large-Scale Natural Experiments

Abstract

Entrepreneurship is the engine of economic advancement and innovation. Leveraging two large-scale, pre-registered natural experiments, we provide the first causal evidence that the cultural diversity of individuals’ social environments stimulates them to become entrepreneurs. In Study 1, 3,632 MBA students from 98 countries were assigned to 540 learning groups that naturally varied in cultural diversity (e.g., in some groups all students were from the same country, whereas in other groups students were from different countries). Multilevel analyses revealed that the cultural diversity of an individual’s learning group positively predicted whether he/she became an entrepreneur upon graduation. Importantly, this positive effect existed for both American and foreign MBA students. Moreover, among individuals who became entrepreneurs, the cultural diversity of their learning groups positively predicted the novelty of their start-ups. Study 2 replicated these effects in another MBA program, in which 2,516 students from 90 countries were assigned to 461 learning groups that naturally varied in cultural diversity. The positive effect of group cultural diversity on entrepreneurial entry was (a) mediated by the number of intercultural friendships an individual had within his/her learning group and (b) moderated by the personality trait of openness to experience, such that the positive effect of group cultural diversity was stronger for more (vs. less) open individuals. By demonstrating the entrepreneurial benefits of cultural diversity, this research offers broad and tangible implications for cultural diversity, creativity, entrepreneurship, and immigration policies.