PI: Frank R. Dobbin Institution: Harvard University
SES-1023591 PI: Alexandra Kalev Institution: University of Arizona
The investigators examine how corporate diversity influences performance across time, occupations, and industries. Some studies suggest that diversity in the workplace will lead to conflict and suppress corporate performance while other studies suggest that demographic diversity can improve creativity, innovation, work group performance, and network connections. The researchers hypothesize that any negative effects of conflict will dissipate with time, leaving the positive effects of workplace diversity. Two datasets on corporations are combined: the Compustat financial dataset covering publicly traded companies in the U.S., and the federally mandated EEO1 reports, detailing the gender, race, and ethnic breakdown of workers in U.S. workplaces. A sample of 3000 publicly traded companies that meet the EEO1 reporting requirements are merged for the years 1971 to 2010 from the two data sources. The resulting dataset provides some 33,000 company-by-year observations, spanning four decades.
Broader Impacts: As the U.S. population and workforce become more diverse, with the growth of immigrants from Asia, Latin America, the Caribbean, and Africa, this research will provide insight into how diversity contributes to productivity, and where and why it poses problems.
Award number: 1023591 Participants: CO-PI: Frank R. Dobbin Institution: Harvard University CO-PI: Alexandra Kalev Institution: University of Arizona Project Outcomes Report University of Arizona January 2013 "This Project Outcomes Report for the General Public is displayed verbatim as submitted by the Principal Investigator (PI) for this award. Any opinions, findings, and conclusions or recommendations expressed in this Report are those of the PI and do not necessarily reflect the views of the National Science Foundation; NSF has not approved or endorsed its content." Research, Intellectual Merit and Broader Impact The goal of the project is to understand how workforce diversity has influenced corporate financial performance across time, occupations, and industries. To date there is much heat among scholars and practitioners, but very little light, around this issue. A number of studies have suggested that gender, and particularly racial and ethnic diversity in the workplace will suppress corporate performance through group conflict, stereotype threat, and other mechanisms. Yet other studies show that demographic diversity can improve creativity, innovation, work group performance, and network connections. There are good theoretical reasons to believe that when higher levels of minority representation endure over time most negative effects of diversity will disappear. For example contact theories suggest when people from different groups have long term contact with each other, and in contexts where the demographic composition is more balanced, stereotyping and conflict are reduced. Furthermore, with time workers and managers come to take for granted and support the organizational patterns and practices that endure. We therefore hypothesize that with the institutionalization of diversity in individual establishments, the negative performance consequences of workplace diversity will disappear. Where diversity has negative effects, we expect they will be replaced by neutral or positive effects as occupational diversity either rises above token levels, endures over time, or both. This project uses unique data and a novel theoretical approach to resolve debates about the effects of diversity on corporate performance that have interested not only academics, but business leaders and politicians. As the U.S. population and workforce become more and more diverse, with the growth of immigrants from Asia, Latin America, the Caribbean, and Africa, we need better evidence of how diversity contributes to productivity, and where it poses problems that academics and business leaders can address. Our theoretical contribution will be to bring to bear insights about institutionalization, from organizational theory, and to develop grounded theoretical insights about how the institutionalization of diversity affects corporate performance. To date studies of the effects of workforce diversity have not used the kind of panel data methods used in studies of corporate performance. Consequently, theories about the effect of diversity on corporate performance have not been subjected to rigorous tests. This research combines two exceptionally rich datasets on corporations: the Compustat data, covering some 400 financial variables annually for publicly traded companies in the U.S., and the federally mandated EEO1 reports, detailing the gender, race, and ethnic breakdown of workers in nine occupational categories in U.S. workplaces with at least 100 workers. For 12,000 publicly traded companies that meet the EEO1 reporting requirements, we created a single dataset. While the initial plan was to create a dataset for a sample of 3,000 firms, the current dataset represents the population of firms that contain data in both the EEO1 reports and the Compustat database, for overlapping years between 1971 and 2011. The Arizona site has completed its work. Due to the expansion from a sample of 3,000 firms to the population of 12,000 firms and the expansion to 2011, the Harvard site have requested a no-cost one year extension. There are additional results for this research project yet. This report will be appended when findings are available.
