Increasing international labor migration has important effects on the workforce composition of firms in all migrant-receiving countries. The consequences of these changes for firm performance have attracted growing attention in recent years. In this paper, we focus explicitly on the impact of cultural diversity among migrant employees on the innovativeness of firms. We briefly synthesize empirical evidence from a range of contexts across Europe, North America, and New Zealand. We then utilize two unique and harmonized linked employer-employee datasets to provide comparative microeconometric evidence for Germany and the Netherlands. Our panel datasets contain detailed information on the generation of new products and services, determinants of innovation success, and the composition of employment in establishments of firms over the period 1999 to 2006. We find that innovation in both countries is predominantly deter-1 The empirical research reported in this paper was conducted as part of the 2009-2013 Migrant Diversity and Regional Disparity in Europe (MIDI-REDIE) project, funded by the NORFACE-Migration research program, . Financial support from the German Research Foundation (DFG) is also gratefully acknowledged as part of the projects "Diversity and success of organizations" and "Diversity and individual careers." IMR Volume 48 Number S1 (Fall 2014):S377-S416 S377 mined by establishment size and industry. Moreover, obstacles encountered and organizational changes faced by firms drive innovation too. With respect to the composition of employment, the presence of high-skilled staff is most important. Cultural diversity of employees has a positive partial correlation with product innovation. The size and statistical significance of this effect depends on the econometric model specification and the country considered. We conclude from the literature synthesis and the new comparative evidence that cultural diversity of employees can make a positive, but modest and context dependent, contribution to innovation.