Purpose ‐ This paper aims to explore the assumption that the impact of cultural diversity on knowledge creating capability is consequent to associated differences in knowledge and perspectives, and suggests that these knowledge differences produce their effect by triggering deliberative, collaborative behaviours. Design/methodology/approach ‐ To investigate the impact of intervening variables on diversity's impact in teams, the paper assesses whether cognitive heterogeneity operates as a mediating variable between cultural diversity and knowledge creation, and whether debate operates as a second stage mediator. The paper utilises a survey-based, quantitative approach and collects data from 98 teams, which is analysed using causal steps approach. Findings ‐ The results provide support for the assumed impact of cognitive heterogeneity and also support the existence of sequential mediation pathway, with debate operating as a second stage mediator between cognitive heterogeneity and knowledge creation. Originality/value ‐ The paper advances the research on diversity, cross-cultural team dynamics and knowledge creation in two main ways. First, it investigates the role of team cognitions in the creation of new ideas by cross-cultural teams. This responds to calls to understand the factors impacting on the performance of diverse teams (Ayoko and Hartel). Second, it incorporates deliberative team processes into the model as a second-stage mediator, which responds to calls to understand the role of process variables in team knowledge creation efforts (Drach-Zahavy and Somech).