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Companies In Gay-Friendly States Are More Innovative

No surprise, tolerant people have better business brains.

Companies In Gay-Friendly States Are More Innovative

Companies in states with nondiscrimination laws are more innovative, issuing many more patents than those in states that allow discrimination based on sexual orientation and gender identity. Not only that, say the authors of a new study, innovative firms tend to attract more open-minded people, "who are generally more creative than antigay employees."

The study comes from economists Huasheng Gao and Wei Zhang, and is published in the journal Management Science. It looks at the effects of U.S. state-level employment nondiscrimination acts (ENDAs) on business activities, and finds that companies headquartered in states with ENDAs are more innovative than those in states that allow discrimination.

The test their theory, Gao and Zhang looked at the activities of 58,009 U.S. corporations between 1976 and 2008, comparing their patent activity with the years in which ENDAs were introduced in various sates. They found that companies in states with anti-discrimination laws consistently out-innovated companies in more backward states. But why? Because the laws helped them attract brighter employees.

In general, those who are more likely to be pro-gay are younger, better educated, more tolerant, more open-minded, more risk-taking, have diverse backgrounds, and exhibit a stronger ideological liberalism. Further, these types of people also tend to be more creative. In contrast, those who are older, are more conservative, and exhibit a stronger religiosity tend to be antigay.

The authors say that these smart, innovative employees are more likely to join companies in states with ENDAs, "since these firms cannot pursue discriminatory employment policies toward homosexuals." The result is that companies based in ENDA states filed 8% more patents, and increased the number of patent citations by 11%.

This could be anecdotal, but another piece of information cements the theory. Companies that had previously implemented nondiscrimination policies saw a smaller jump in innovation (as measured by patent filings) when state ENDAs were introduced. That is, they were already enjoying the services of smarter, enlightened employees because of their company policy, so the same rules enforced at state level had a smaller cumulative effect. The authors also examined the relocation decisions of individuals to determine their reasons for moving.

It's still possible that the evidence is circumstantial, though. The authors point out that a state may adopt ENDAs due to pressure from "forward-thinking, progressive business leaders." It's also possible that the passing of ENDAs is a part of a general package of business-improving policies in a state, which would relegate ENDAs to an indicator, instead of the cause for more innovation.

Still, the numbers are startling, and demonstrate that bigotry and chauvinism are not just bad for individuals, but bad for business. Until federal anti-discrimination laws take care of the problem for the whole country, maybe even the most backward states will enact ENDAs if they can see how it affects the bottom line.

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