Vertical Educational Diversity and Innovation Performance

Abstract

This paper uses panel data of Swiss firms to analyze the impact of education?level diversity in the workforce on innovation performance, addressing endogeneity by exploiting within?firm variation as well as variation in labor supply across regions. We find that vertical educational diversity increases the extensive margin of R&D and product innovation, particularly new product innovation. However, the relationship with process innovation, R&D intensity, and product innovation intensity is insignificant or even negative. These results are in line with the idea that vertical educational diversity enhances the creative moment of the invention phase, while it might affect the commercialization phase negatively due to the dominance of coordination and communication costs relative to the gains in creativity.