The business world has long debated the effect of gender diversity on business outcomes. 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 sometimes harm firm performance.
But most research has looked at this question within a single country or industry. As a result, their findings are likely limited to that country or industry. This got us thinking: 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 research one of us (Professor Zhang) conducted, this is exactly what was found. In a study of 1,069 leading firms across 35 countries and 24 industries, we 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, we 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. Those that don’t, don’t.
For example, we found that the percentage of women in telecommunication companies in Western Europe, historically a relatively gender-inclusive context, was significantly tied to a company’s market value. Specifically, a 10% increase in Blau’s gender diversity index (see more in our sidebar) related to a roughly 7% increase in market value. However, in the energy sector in the Middle East, which has historically not been gender-inclusive, firms’ gender diversity was unrelated to company performance. MORE