Exclusive extract from IBCR 3.0: The Business Case for cultural diversity

What are the bottom-line effects of cultural or ethnic diversity? How can companies benefit from this kind of diversity and at the same time avoid possible negative side effects? This exclusive extract from IBCR 3.0 presents two sample studies featured in the unique compendium of business case studies.

The first study was done by Stahl, Maznevski, Voigt and Jonsen and investigates how cultural diversity affects team processes. It was conducted as a meta-analysis of 108 empirical studies with a combined sample size of 10,632 teams. The study finds that cultural diversity within teams can have both positive and negative effects. Process gains from culturally diverse teams include creativity, effective communication, social integration and team satisfaction. The process loss is potential conflict, as people from diverse backgrounds and experiences may hold different belief structures and values. “This threat can easily be addressed by team development”, comments Diversity expert, Michael Stuber, referring to other studies from the field.

Another study in the area of ethnic diversity was done in Canada: The study shows that racioethnic diverse organisations are more innovative due to the greater variety of information and knowledge resources available for generating new ideas. Involving employees in learning and decision-making processes will result in the development of better and further-reaching ideas. The relation between racioethnic diversity and innovation is maximised under the condition of greater employee involvement, especially when marginalised and predominant groups participate equally in involvement behaviours. Using a sample of 182 large Canadian organisations, the researchers found a three-way interaction between level of employee involvement, variation in involvement, and racioethnic diversity on innovation.

The Canadian study shows that when level of employee involvement is high, racioethnic diversity is positively related to innovation under the condition of high diversity of team involvement, where minority employees are equally or more active in involvement behaviours than their white counterparts. Therefore, researchers conclude, unequal involvement between predominant and marginalised racioethnic groups reduces the positive impact of a highly involved workforce.

Also Stahl et al. went beyond their initial finding and created hypothesis on how task complexity and structural aspects of the team (such as team size, team tenure and team dispersion) moderate the effects of cultural diversity on teams. Testing the hypothesis found that more diverse teams experienced the process gain of increased creativity, but also the process loss of increased conflict. More diverse teams experienced the process loss of lower social integration, but culturally diverse teams experienced more effective communication and reported higher satisfaction than homogeneous teams.

These results (from 2009 and 2002 respectively) show that the mere presence of people from different cultural backgrounds is a necessary but insufficient criterion for benefits from diversity. It reconfirms the need for thoughtful D&I programmes and measures, such as inter-cultural training, and a cultural change inside organisations to avoid possible negative effects. More recent studies in included in IBCR 3.0, like one from Denmark (2013) go further as they provide evidence for more direct correlations: a rise of 10% in ethnic diversity leads to an increase of 2.2 – 4 % in the number of firms’ patent applications. In addition, heterogeneity in the workers’ knowledge in combination with cultural diversity induces a wider patent technological spectrum in a company.

The studies mentioned are just a snapshot extract from the large amount of empirical evidence on the bottom-line effects of D&I complied in IBCR 3.0. 46 out of 195 focus on the area of cultural or ethnic diversity. A larger number looks at gender diversity and even more investigate comprehensive question. Find out more at this website.