Although "valuing diversity" has become a watchword, field research on the impact of a culturally diverse workforce on organizational performance has not been forthcoming. Invoking a resource-based framework, in this study I examined the relationships among cultural (racial) diversity, business strategy, and firm performance in the banking industry. Racial diversity interacted with business strategy in determining firm performance measured in three different ways, as productivity, return on equity, and market performance. The results demonstrate that cultural diversity does in fact add value and, within the proper context, contributes to firm competitive advantage.Increasing cultural diversity in the workforce poses one of the most challenging human resource and organizational issues of our time. Academicians and practitioners have sought to understand the impact of both cultural diversity and diversity management on organizational effectiveness. Although most academic research has been primarily concerned with the impact on individual and group outcomes of diversity in dyadic relationships and groups most applied research has been more concerned with the management of an increasingly culturally diverse workforce. There are a variety of management issues and activities related to recruiting, selecting, and using diverse human resources.Consistent with most academic research, this article focuses on the effects of cultural diversity, distinct from its management. The reported research does depart from other research studying diversity at the individual and group level in that it investigated the impact of diversity at the firm level. "Evidence of diversity's impact on the bottom line has not been systematically measured and

Extending previous theorizing on cultural diversity's organizational effects by integrating value-in-diversity and social identity perspectives with the framework ofBlau's (1977) theory of heterogeneity, we hypothesized curvilinear relationships between racial and gender diversity in management and firm performance. We evaluated relationships within the context of firm-level entrepreneurial orientation. Our empirical study indicated complex relationships among study variables. It revealed that innovativeness positively and risk taking negatively moderated nonlinear relationship patterns for both racial and gender heterogeneity. Research and practical implications are discussed. 2004 257 Richard, Barnett, Dwyer, and Chadwick

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We conduct a firm‐level, 6‐year longitudinal analysis on the impact that racial diversity in human resources has on financial performance. When considering short‐term performance outcomes, we predict a curvilinear relationship between diversity and performance (i.e., firm productivity). Although we find evidence of a U‐shaped relationship between racial diversity and productivity, the relationship is stronger in service‐oriented relative to manufacturing‐oriented industries and in more stable vs. volatile environments. For longer‐term profitability, we propose and find support for more of a positive linear relationship between diversity and performance (i.e., Tobin's q) than a nonlinear one. This linear effect is stronger and more positive in munificent compared to resource‐scare environments. Thus, we aid in reconciling existing, often contradictory, studies by demonstrating the potential short‐term vs. long‐term impact of racial diversity on performance. We offer implications for future research on diversity considering the current and projected demographic landscape. Copyright © 2007 John Wiley & Sons, Ltd.

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Extending previous theorizing on cultural diversity's organizational effects by integrating value-in-diversity and social identity perspectives with the framework of Blau's (1977) theory of heterogeneity, we hypothesized curvilinear relationships between racial and gender diversity in management and firm performance. We evaluated relationships within the context of firm-level entrepreneurial orientation. Our empirical study indicated complex relationships among study variables. It revealed that innovativeness positively and risk taking negatively moderated nonlinear relationship patterns for both racial and gender heterogeneity. Research and practical implications are discussed. THEORETICAL DEVELOPMENT AND REFINEMENT Cultural Diversity in Management and Firm Performance Cultural diversity has been studied in both laboratory and field settings. In general, lab studies, grounded in the value-in-diversity perspective, have indicated that diversity within work groups increases their effectiveness (Cox et al., 1991; We would like to thank Associate Editor Marshall Schminke and three anonymous AMJ reviewers for their helpful comments.

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