The impact of racial diversity on intermediate and long‐term performance: The moderating role of environmental context

Abstract

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.

The Link Between Diversity and Equality Management Practice Bundles and Racial Diversity in the Managerial Ranks: Does Firm Size Matter?

“…We also included several environmental-level control variables that may influence racial diversity (cf. Richard, Murthi, & Ismail, 2007). Using each firm's standard industrial classification (SIC) code, industry type was coded as a dummy variable representing 0 for firms in the manufacturing industry (SIC code = 0 from 2,000 to 3,999) and 1 for firms in the service industry (SIC code = 1 if less than 2,000 and greater than 3,999) (Gomez-Mejia, Larraza-Kintana, & Makri, 2003).…”

The impact of external market factors on the operational practices and performance of companies

“…And finally in complex environments managers perceived their decisions as more uncertain. Richard et al (2007) collected a full list of attributes from literature, "such as levels of uncertainty, stability, turbulence, volatility, complexity, relative scarcity of resources and hostility" (p. 1219), but each of these can be traced back to our original attributes discussed before. To summarize, the intensity of competition and market dynamism seem to be adequate factors to describe the market environment.…”

The impact of cultural diversity on the effectiveness of construction project teams

“…Richard et al (2007) research, based on Blau's (1977) theory of heterogeneity with knowledge-based view, provided evidence of the curvilinear relationship between racial diversity and intermediate performance. They discovered a stronger effect of racial diversity would be found for service-oriented firms.…”

“…***Insert here table 1***** The questionnaire also collected data to measure the extent of cultural diversity using Blau's Index of diversity (1977). Blau's Diversity Index = (1 -∑ Pi 2 ), where Pi is the proportion of group members in category i. category will be the nationality of team members in this research (Richard et al, 2007). The index ranges from 0 to 0.8.…”