The Impact of Immigration and Local Workforce Characteristics on Innovation

We combine firm-level microdata on innovation with area-level workforce characteristics to examine the relationship between local workforce characteristics, especially the presence of immigrants and local skills, and the likelihood of innovation by firms. We examine a range of innovation outcomes and test for the relationship for selected subgroups of firms. We find a positive relationship between local workforce characteristics and average innovation outcomes in labour market areas, but this is accounted for by variation in firm characteristics such as firm size, industry, and research and development expenditure. After controlling for these influences, we find no systematic evidence of an independent link between local workforce characteristics and innovation outcomes.