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The Competitive Advantage of Cultural Diversity



In my book, ‘Bridging Cultures: the guide to social innovation in cosmopolitan cities’ I make the case why bridging cultures matters. The concept of ‘bridging social capital’ was first introduced by Robert Putnam in his article ‘Bowling Alone: America’s Declining Social Capital’. The article highlighted the declining numbers of voters, the emptying out of bowling alleys and other social meeting places for lack of patrons, and the loss of a sense of community ties. Putnam defined this decline of civic engagement in the idea of ‘social capital’. Social capital is the value placed on social networks and ties that affect economic productivity, happiness, health, crime levels, and open democracy. He explained that social capital refers to the connections among individuals based on mutual support, cooperation, and trust.

Putnam also distinguished between two forms of social capital; bonding and bridging. In the case of bonding social capital, people relate to others who reinforce similar cultural identities . They risk becoming inward-looking as a way to build solidarity and self-help. In the case of bridging social capital, however, social networks are outward-facing. They encompass people across diverse social groupings. Although there are pros and cons for both forms of social capital, and many people combine both forms, this book is particularly interested in bridging social capital. Bridging capital are linkages to external networks that broaden social circles and allow for greater innovation and economic success.

The trend that Putnam’s article highlighted was the extent in which people were withdrawing from their communities. One measure of this decline was the loss of trust in strangers. In America in the 1960s, Putnam reported that more than half of all Americans said they trusted others. Today fewer than a third say the same thing. Similarly in the UK in the 1950s, more than two-thirds of British people said that most people could be trusted. In the 1990s that had fallen to 29 per cent of the population. Sociologists blame the decline of what they call ‘traditional trust’ to increased choice, diversity and mobility. Without traditional trust there is an increase in social isolation, and a decline in close friendships.

This lack of trust and social connections has a cost. According to the UK’s independent Social Integration Commission, the drop in social mobility and increased isolation between groups means that problems are emerging in areas from employment to health. This costs the UK the equivalent of 0.5 per cent of GDP or £6bn each year. The impact alone on the long-term jobless, whose lack of contact with those in work means they are likely to remain unemployed for longer, is estimated to be £1.5bn. At a community level, factors such as a lack of friendships across age groups are resulting in loneliness and anxiety. The associated costs are £700m in healthcare and £1.2bn for treating an increased prevalence of cardiovascular disease.

The economic case for greater social capital is not just about prevention and addressing the deficit. In fact there are many economists who consider the benefits of social capital from the perspective of co-operation, trust and coordinated action between trading individuals and companies. Increased social capital maximizes economic interests whilst at the same time maximizing social welfare.

Several commentators have also drawn on the economic growth resulting from bridging social capital. One commentator, Richard Florida, with his creative capital theory, states that those cities most open to diversity of all sorts and with high densities of culturally diverse populations are what promote innovation and economic growth. Diversity gives them their competitive edge. Phil Wood and Charles Landry, call intercultural innovation, the ‘diversity advantage’ in which bridging social capital supports:

  • Business start-ups and competitiveness
  • Workforce diversity and competitiveness
  • Linguistic diversity and competitiveness
  • Cultural diversity, creativity and competitiveness
  • Supplier diversity and competitiveness
  • Diaspora and international networks and competitiveness

In fact, The London Development Agency promotes diversity as one of London’s greatest strengths. £90 billion sales were recorded for Black Asian Minority ethnic owned businesses in 2004. Wood and Landry argue that cross-cultural interactions have been a major source of new ideas and innovations. In their interviews of leading migrant entrepreneurs in London they conclude: ‘each of these entrepreneurs borrows some aspects from their original culture and applies it to the identification of new niches where they can innovate and leave their mark. Each builds on the social, economic and cultural strengths of their original community, but then departs from it and creates something that at times is alien, or in conflict with their community. However, it is precisely this tension and this need to break with tradition that gives them strength and the impetus to expand into new ventures. It is usually at this stage that they seek like-minded people to work with. And this is also why they prefer to employ people from diverse backgrounds, rather than from their own. It is the talent, the flexibility and the capacity to adapt that they seek in colleagues and employees from other backgrounds and not the security of family ties, or the cultural understanding of the ethnic group.’

By Dr Noha Nasser

Bridging Cultures: The guide to social innovation in cosmopolitan cities can be purchased from Amazon:

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