Workforce Composition and Innovation: How Diversity in Employees’ Ethnic and Educational Backgrounds Facilitates Firm‐Level Innovativeness

Abstract

This article studies how workforce composition is related to a firm's success in introducing radical innovations. Previous studies have argued that teams composed of individuals with diverse backgrounds are able to perform more information processing and make deeper use of the information, which is important to accomplish complex tasks. We suggest that this argument can be extended to the level of the aggregate workforce of high-technology firms. In particular, we argue that ethnic and higher education diversity within the workforce is associated with superior performance in radical innovation. Using a sample of 3,888 Swedish firms, this article demonstrates that having greater workforce diversity in terms of both ethnic background and educational disciplinary background is positively correlated to the share of a firm's turnover generated by radical innovation. Having more external collaborations does, however, seem to reduce the importance of educational background diversity. The impact of ethnic diversity is not affected by external collaboration. These findings hold after using alternative measures of dependent and independent variables, alternative sample sizes, and alternative estimation techniques. The research findings presented in this article would seem to have immediate and important practical implications. They would suggest that companies may pursue recruitment policies inspired by greater ethnic and disciplinary diversity as a way to boost the innovativeness of the organization. From a managerial perspective, it may be concluded that workforce disciplinary diversity could be potentially replaced by more external links, while ethnic diversity could not

Organizing for Radical Innovation: Exploring Novel Insights

“…Theoretical perspectives range from diversity theories (Mohammadi, Brostrom, and Franzoni, ) to human resource management (Aagaard, ), institutional theories (Radaelli, Currie, Frattini, and Lettieri, ), open innovation (Kamuriwo, Baden‐Fuller, and Zhang, ), organizational identity and managerial identity‐dissemination discourse (Perra, Sidhu, and Volberda, ), resource management (Li, Li, Wang, and Ma, ), and social network theories (Dong, McCarthy, and Schoenmakers, ). The proposed methodologies encompass both case studies (Aagaard, ; Radaelli et al, ) and quantitative analyzes, with the latter including panel data (Kamuriwo et al, ), network analyses (Dong et al, ), and cross‐sectional specifications (Li et al, ; Mohammadi et al, ; Perra et al, ). Six out of seven papers focus on a single national context, namely China (Li et al, ), Italy (Radaelli et al, ), the Netherlands (Perra et al, ), Sweden (Mohammadi et al, ), the United Kingdom (Kamuriwo et al, ), and the United States (Dong et al, ).…”

“…The proposed methodologies encompass both case studies (Aagaard, ; Radaelli et al, ) and quantitative analyzes, with the latter including panel data (Kamuriwo et al, ), network analyses (Dong et al, ), and cross‐sectional specifications (Li et al, ; Mohammadi et al, ; Perra et al, ). Six out of seven papers focus on a single national context, namely China (Li et al, ), Italy (Radaelli et al, ), the Netherlands (Perra et al, ), Sweden (Mohammadi et al, ), the United Kingdom (Kamuriwo et al, ), and the United States (Dong et al, ). Aagaard () presents a case study of a Danish firm and seven validation studies of firms from four countries—Denmark, Belgium, Switzerland and the United States.…”

“…Moreover, the papers differ in the focus of their investigation. The first paper in the special issue (Mohammadi et al, ) focuses on individual characteristics and how they relate to the diversity (in terms of ethnicity and education) of the firms’ workforce, which, in turn, can affect the firms’ performance in radical innovation. The authors’ work is motivated by research that suggests that the performance of scientific teams in public research institutions relates significantly to various dimensions of the diversity of the team.…”

The Impact of Open Innovation on Employee Mobility and Entrepreneurship

“…This dataset is combined with the Swedish employer-employee registry data provided by Statistics Sweden (SCB). This second data source contains exhaustive information about the composition of the Swedish labor workforce and employee mobility events (Mohammadi et al 2016). Although the firms and the individuals in the datasets are anonymous, unique identification codes 1 for employees and employers allow for linking employees to firms.…”

“…In this respect, both measures are restricted to employees that are highly skilled according to the Swedish Standard Classifications of Occupations (SSYK) given our interest in the mobility of R&D employees (see Mohammadi et al 2016). …”