Can London’s diversity give it the edge over Silicon Valley?

Can London’s diversity give it the edge over Silicon Valley?

It is widely considered that diversity is an important part of nurturing innovation. Research from Northwestern University’s Kellogg School of Management suggests that even if people from different backgrounds have exactly the same skills and knowledge, diverse teams may still do better than more homogeneous ones. Based on this premise, it is conceivable that London could have an edge over Silicon Valley, according to a recent survey, which suggests London’s diversity is considered an advantage.

In the survey of 150 of the 2,200-strong Tech London Advocates network of tech experts, business leaders and investors across London and from around the world, nearly half (48 percent) of those surveyed thought the city’s technology community was more diverse than San Francisco’s digital workforce.

Despite the global reputation of Silicon Valley, a third (33 percent) of London’s technology community believe it is now easier to recruit international digital talent to the British capital than the Bay Area. Whilst 42 percent predict San Francisco will remain the dominant location for digital talent, the growth of London’s technology sector is having an impact on international recruitment.

Russ Shaw, founder of Tech London Advocates (TLA), said, “The Bay Area [Silicon Valley] will always remain the global home of technology, but it is impossible to ignore the recent success of London’s tech hub. The creativity and diversity of London’s workforce is driving innovation and attracting talent, which may surprise many in Silicon Valley.”

He also draws on his experience of building the TLA network during 2015 in various major tech centers around the world. In an op-ed in CityAM, he comments, “This year I have attended and hosted events in Bangalore, Copenhagen, Berlin and New York all with a single purpose – to celebrate London’s thriving digital sector. Speaking to technology professionals abroad it is clear that London’s reputation is built on innovation, cultural openness and diversity.”

He adds that London’s diversity sparks ideas, welcomes new thinking and encourages competition. It is the perfect environment for the digital industry and has led to some of the most exciting tech startups in Europe. “In the growing global demand for digital skills and talent, a reputation for diversity must be nurtured. For years we have been struggling to find ways of competing with San Francisco’s digital dominance. Maybe the answer has been here all along.”

He added that the UK’s education system was central to the country’s ability to draw in international talent. However he also said that serious problems remained around immigration legislation, the cost and availability of housing and offices and the looming threat of the UK’s exit from Europe.

The emphasis is on diversity being a crucial component of any digital community. Shaw also said, “International talent is driving growth and innovation in London’s digital tech hub, bringing complementary skills and unrivalled creativity to the industry. San Francisco still has the world’s largest tech scene, but London’s creativity and diversity means it will continue hot on the Bay Area’s heels.

Research backs up the case for diversity in innovation

A research paper from Northwestern University Kellogg School of Management, published last month (November 2015) by Willemien Ketsy and Alvaro Sandroni backs up the case for diversity to nurture innovation. It shows that while diverse groups experience more frictions than homogeneous ones, they are also less conformist. Homogeneous groups minimize the risk of miscoordination, but they may get stuck in an inefficient equilibrium.

It suggests that diverse groups may fail to coordinate, but if they do, they tend to attain efficiency. This fundamental tradeoff determines how the optimal level of diversity varies with social and economic factors.

What we can draw from this research is that when it is vitally important to avoid miscoordination, homogeneous groups are optimal. However, when it is critical to implement new ideas and innovation, diverse groups perform better. Hence the paper shows that there is a clear and compelling economic rationale for diversity even in the absence of skill complementarities or differences in information: diversity challenges conformity and stimulates the adoption of innovation.

We’ve seen how some of the growth of Silicon Valley in the past was triggered by diversity – with founders or inventors were immigrants or non-American. The diverse teams that were built created the innovative technologies that we take so much for granted today. If the London survey is anything to go by, then it is clear that London and potentially other cities may have a distinct edge over Silicon Valley in creating the innovative new startups and growth companies of tomorrow.

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