An Institutional Approach to Gender Diversity and Firm Performance

Letian  Zhang

Article | Organization Science | Forthcoming

An Institutional Approach to Gender Diversity and Firm Performance

Abstract

This study examines data from 35 countries and 24 industries to understand the relationship between gender diversity and firm performance. Previous studies report conflicting evidence: some find that gender-diverse firms experience more positive performance and others find the opposite. However, most research to date has focused on a single country or industry and has not accounted for possible variation across social contexts. This paper advances an institutional framework and predicts that gender diversity’s relationship with performance depends on both its normative and regulatory acceptance in the broader institutional environment. Using a unique longitudinal sample of 1,069 leading public firms around the world, I find that the relationship between gender diversity and firm performance varies significantly across countries and industries due to differences in institutional context. The more gender diversity has been normatively accepted in a country or industry, the more gender-diverse firms experience positive market valuation and increased revenue. These findings underscore the importance of the broader social context when considering the relationship between gender diversity and firm performance.

Keywords: institutional theory; cross-cultural; Diversity; Gender; Organizations; Performance; Situation or Environment; Cross-Cultural and Cross-Border Issues;

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Citation:

Zhang, Letian. "An Institutional Approach to Gender Diversity and Firm Performance." Organization Science (forthcoming).

Although millions of workers every year experience ownership change as their firms get acquired, it remains unclear how such an event shapes inequality in the workplace. This study addresses this question using a difference-in-differences design on a nationally representative sample covering 37,343 acquisition events from 1971 to 2015. Contrary to the common assumption, while acquisitions increase skill-based inequality, they strongly reduce both racial and gender inequality. On the one hand, they widen the skill-based gap, leading to fewer jobs for middle managers, back-office workers, and blue-collar workers while adding more jobs for educated professionals. But on the other hand, they shake up existing arrangements and open up opportunities for minorities and women to move into managerial ranks and new occupations, especially in those establishments where white men have previously occupied the most central positions. This study suggests that although mergers and acquisitions favor the more skilled workers, they also produce an unintended consequence of shaking things up and making room for more racial and gender equality in the workplace.

Article | Harvard Business Review (website) | 2019

When Gender Diversity Makes Firms More Productive

Stephen Turban, Dan Wu and Letian Zhang

Does diversity make a company more productive? Many say yes—some researchers argue that gender diversity leads to more innovative thinking and signals to investors that a company is competently run. Others say no—conflicting research indicates that gender diversity can disrupt social cohesion, making people less likely to collaborate. Most of this research, however, has looked at the question within a single country or industry. Could the conflicting research be due to differences in context? Region and industry might affect people’s opinions of gender diversity, and this might then affect whether or not diversity leads to stronger outcomes. In a recent study of 1069 leading firms across 35 countries and 24 industries, researchers found that gender diversity relates to more productive companies, as measured by market value and revenue, only in contexts where gender diversity is viewed as “normatively” accepted. By normative acceptance, they mean a widespread cultural belief that gender diversity is important. In other words, beliefs about gender diversity create a self-fulfilling cycle. Countries and industries that view gender diversity as important capture benefits from it. While those that don’t, don’t. The researchers outline three main reasons why opinions about the value of diversity matter so much to the actual value it brings. And these may provide lessons for managers who wish to capture the benefits of gender diversity.

Keywords: Gender; Diversity; Performance; Performance Productivity;

Citation:

Turban, Stephen, Dan Wu, and Letian Zhang. "When Gender Diversity Makes Firms More Productive." Harvard Business Review (website) (February 11, 2019). View Details

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Although it is well known that organizational and team performance influences strategic decision-making, little is known about its impact on ascriptive inequality. This study proposes a performance effect on racial bias: higher team performance reduces managers’ performance pressure and, therefore, leads to more managerial bias in the subsequent round. I find strong evidence for this proposition using a fine-grained dataset from the National Basketball Association. In this highly competitive industry, team performance is positively associated with coaches’ subsequent exercise of racial bias: players experience more favorable treatment from same-race coaches after their teams have won more games. This study demonstrates an important relationship between performance feedback and racial bias and suggests that even in highly competitive industries, managerial bias may be prevalent in high-performing teams and organizations.

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An Institutional Approach to Gender Diversity and Firm Performance

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