No 2018/5 Cultural Diversity and Employment Growth

Moderating Effect of the Recent Global Financial Crisis

Abstract

This paper analyses the effect of cultural diversity on employment growth, considering the recent Global Financial Crisis (GFC) as a moderating factor. In doing so, we developed competing hypotheses based on Blau’s theory of heterogeneity versus an alternative perspective which combines the resource-based view (RBV) with social identity theory (SIT). We empirically test such theories using a unique longitudinal dataset comprising the population of all firms in Sweden between 2003 and 2012. We find support for the latter hypothesis, i.e. the relationship between cultural diversity and employment growth is inverted U-shape, which is even more pronounced during/after the GFC. We discussed the implication of findings for other contexts.