We investigate econometrically whether cultural diversity at the workplace boosts innovation. Our longitudinal linked employer‐employee data combines two innovation surveys, with Dutch administrative, tax and regional data. We analyse the determinants of a firm's product and process innovations with respect to the firm's internal resources, employee composition and regional agglomeration externalities. We reconfirm the findings of several other recent studies showing a positive partial correlation between innovation and cultural diversity in pooled cross‐sectional data; in some cases even when accounting for reverse causation. However, no statistically significant traces of benefit for innovation from cultural diversity remain after introducing firm fixed effects.