A Diverse and Inclusive Culture Can Benefit Your Business and the Local Economy


By Leora Eisenstadt, Assistant Professor and & William Bunting, Research Assistant Professor in the Department of Legal Studies at the Fox School of Business


Diversity and inclusion spurs economic development. During the Industrial Revolution, Europe and the New Word developed at a rate of economic development that far outpaced the rest of the world. Although numerous explanations have been suggested, a fast-growing literature argues that an openness and acceptance of other cultures fueled the New World’s economic ascendance. Under this view, cultural diversity and tolerance are not merely byproducts of economic progress, but, rather, are key drivers of economic growth and prosperity.


Attracting Top Talent

Diversity and inclusion have a positive impact on a city through a number of different channels. Cultural diversity leads to the creation of international connections that aid the flow of labor, goods, services and knowledge between a city and other regions, both within the United States, and beyond. This flow, in turn, results in increased rates of business formation, product development and innovation, and, ultimately, a more productive and dynamic labor force inspired by the opportunities and ideas that flourish in diverse and socially-inclusive urban environments. In addition, diversity and inclusion helps attract knowledge-workers from other regions and operates to sustain a “creative class” employed in research and development or other high-tech industries that rely on creativity and innovative ability, which are essential to the long-term economic sustainability of a city as economic growth is increasingly linked to the creation of ideas and other forms of intellectual property. Diversity and inclusion within a city offer a competitive advantage in terms of attracting the best and brightest that helps not only the growth of the local education sector but local businesses as well. A more diverse workforce with different skills and mindsets is positively correlated with higher rates of business and technological innovation and growth. The World Bank reports that the highest rates of emigration of highly-skilled workers are in regions characterized by a significant lack of diversity and inclusion.


Community Culture

Tourism provides a useful, concrete example of the economic benefits of diversity and inclusion. Many of today’s most-visited cities in the United States include diverse multicultural hubs, such as New York, Los Angeles, Chicago, San Francisco and Miami. Several smaller mid-sized cities, such as Nashville and Austin, have started to attract a growing number of inbound tourists by improving their openness to new people and different ways of thinking. Cultural events and festivals are successful drivers of tourism, increasing visitation and visitor spend. Similarly, constructed cultural neighborhoods, such as Chinatown or Little Italy, attract visitors to a city and provide a competitive advantage over other competing tourist destinations. Diversity and inclusion increase consumer choice not just for tourists, but for residents as well. Exposure to culturally diverse foods and cuisines provide an opportunity for imitation and diversification, as evidenced in the rise of fusion cuisines, and increases the number of different dining experiences from which locals may choose. The benefits of consumption variety, of course, extend beyond food to a broad range of goods and services, including arts, clothing and entertainment events.

Diversity and inclusion also contribute to outcomes that are not easily defined or quantified, but that, nevertheless, possess significant economic value. General community vibrancy, resilience and adaptability may be strengthened by diversity and inclusion in that unanticipated shocks and financial challenges are better able to be met and overcome. Likewise, some people may derive enjoyment from sheer differences. Here, diversity and inclusion possess a pure existence value, an economic benefit in and of itself, independent of any actual or potential effect or consequence.


Increasing Innovative Thinking

In addition to all of the economic benefits to a city, businesses themselves profit from a focus on diversity and inclusion. Research demonstrates that a diverse workplace can yield substantial benefits including increased productivity and creativity, improvements in employee health and well-being, reduction in lawsuits and experiences of discrimination, and enhanced business image. For example, when employees from different backgrounds and life experiences work in teams, the experience of bouncing ideas off one another can lead to innovative concepts and approaches. When managers encourage employees to appreciate each other’s diverse perspectives and use the diversity of ideas and experiences in their work, the product is often more valuable. This benefit can be seen among employees, in the C-Suite, and even at the board level. Diverse teams bring wider life experiences and yield better and more creative ideas.

Similarly, diverse workplaces can help to reduce the existence of harmful discrimination. All workplaces suffer, to some extent, from implicit bias as workers unknowingly operate under stereotypes and false assumptions based on race, gender, religion, ethnicity and sexual orientation. These unconscious biases can impede employees’ ability to recruit and hire the best talent, work effectively in teams, and generally feel successful at work. However, research shows that the daily experience of working alongside people from different backgrounds reduces the existence and impact of unconscious biases. While it may seem overly simple, personal experiences with coworkers of different races, genders, religions and the like can eliminate harmful stereotypes, allowing workers’ merit and talent to come through. This reduction in implicit bias can, in turn, reduce the incidence of discrimination suits. When coupled with comprehensive and inclusive HR policies and effective training programs, the maintenance of a diverse workforce can actually reduce acts of discrimination and harassment in the workplace. And, if employees are encouraged to come forward with complaints, are assured that their complaints will be taken seriously, and are protected against retaliation, when discrimination does arise, it can be effectively addressed to prevent further incidents.


Leveraging Inclusive Integrity

Finally, the existence of a diverse workforce can yield reputational dividends and increase a business’s customer base and brand loyalty. Companies with diverse workforces and management teams can more effectively market their products to diverse communities and can create new products and services to meet the needs of diverse populations. For businesses in service industries, customers increasingly expect to be served by a business that reflects a wide variety of identities. Maintaining diversity in management teams can also help to dismantle false stereotypes that negatively impact a company’s ability to advertise its products effectively.

Promoting diversity is not always easy. The recruitment of diverse workplace teams and the creation of a welcoming culture in which diverse individuals can thrive requires significant thought and planning. Likewise, many cities do not become diverse, inclusive oases without substantial effort from government and the business community. But these efforts are not in vain. Attention to diversity and inclusion can yield multiple material and social benefits to cities, businesses and communities.


Philadelphia will host the 2nd Annual 2019 Diversity & Inclusion Conference on March 25-26th. The summit is an open forum to explore and exchange insights about diversity and inclusion best practices for CEOs, diversity officers, educators, corporate leaders and government officials. For more information, visit diphilly.com.


Professor Leora Eisenstadt is an Assistant Professor in the Department of Legal Studies at the Fox School of Business at Temple University.  Prof. Eisenstadt’s areas of scholarship include employment law, business law, race and the law, law and linguistics, work-family conflict, and sex discrimination. Her recent and forthcoming publications include:  Data Analytics and the Erosion of the Work/Non-Work Divide, Whistleblowers Need Not Apply, Suppressed Anger, Retaliation Doctrine, and Workplace Culture, and Fluid Identity Discrimination.


Dr. William C. Bunting is a Research Assistant Professor in the Department of Legal Studies at the Fox School of Business.  He joined the Fox School from the U.S. Department of Justice’s Civil Rights Division, where he served as an economist in housing and civil enforcement. In that role, Bunting developed econometric models that detected potential violations of federal housing, consumer, and civil rights laws, while also contributing to the development of quantitative models and techniques that relate to fair lending and consumer finance.