Six degrees of cultural diversity and R&D output efficiency

Abstract

This paper seeks to highlight the efficiency of R&D output as a function of a cultural treatment (i.e. exposure) effect. The focus of our research is on the percolation of new R&D ideas from the immaterial world of creative ideas through the cultural lattice of the locality into the documented world of knowledge. Our conceptual model is illustrated with a novel numerical operationalization of the cultural percolation of ideas hypothesis, based on the six degrees of separation literature and using a dataset compiled from EUROSTAT and the European Social Survey. The estimation strategy for the current work relies on a difference-in-differences method from a network percolation approach, with a series of alternative controls and region-fixed effects. The results show a positive significant role of the stability (‘no change’) of the six degrees of cultural diversity (i.e., the likelihood to have six people in a row in a locality originating from a culturally different origin) as a treatment effect for R&D output efficiency (the latter being measured as the number of new ideas over a millions of euros of R&D investments). The main value added of the paper is that it offers a theoretical justification and numerical illustration on how the six degrees of separation paradigm can be used to approximate the tipping point of the percolation of new ideas through the local social network from the pool of ideas to efficient R&D investment decisions.