Journal of Intellectual Capital

Purpose – This paper aims to postulate that countries which are either geographical or cultural islands, (defined as countries that are surrounded by neighboring countries that do not speak the same language), tend to experience higher rates of economic growth, all other things being equal.

Design/methodology/approach – Using historical macroeconomic data for a large number of countries and statistical growth regressions that include island dummy variables as explanatory variables, this paper shows that there is econometric evidence supporting the theory of the island factor.

Findings – The findings highlight the importance of a cohesive society with a strong sense of identity while being economically open to global competitive forces. This island mindset acts as a catalyst for enhanced economic growth.

Originality/value – To the best of the authors' knowledge, the island factor is a new and untested hypothesis. Moreover, the paper contributes to the literature on cultural diversity and growth by showing that cultural diversity among neighboring countries is an important factor for economic development.