The effects of diversity in management teams on firm innovation have become an important topic in strategic management. With a few exceptions, however, the literature has focused on diversity in top management teams (TMTs), while the role of diversity in lower management levels, particularly middle management teams (MMTs), has usually been neglected. In this paper, we intend to fill this gap by explicitly differentiating between the effects of diversity in TMTs and MMTs. By matching various firm-level and individual-level datasets, we compile a linked employer–employee panel dataset for Sweden for the period 2004–2012. Focusing on measures of educational diversity, we find that the effects differ considerably between MMTs and TMTs. TMTs’ diversity determines whether firms engage in innovation activities at all, while MMTs’ diversity affects the actual outcome of innovation processes, in particular successful product innovations and their degree of market novelty.
Torben Schubert Associate Professor at CIRCLE, Lund University & Fraunhofer Institute for Systems and Innovation Research (ISI)
Torben, thank you very much for accepting this invitation to have a coffee break with me, how are you doing?
Fine thank you Lorena, it’s really nice to be here and I’m looking forward to this coffee break with you.
Same here I’m not asking you about which coffee are you having because we’re actually having the same but I want to discuss with you your paper on product innovation and educational diversity, could you please tell me what the paper was about?
yes as you may guess all firms now with an internationalizing and continuously more diverse employee base are actually facing the problem of how to manage that diversity and what is interesting when you look at for example the mission statements by all the larger companies, like apple or mercedes or volkswagen, they have a very positive ground position on that diversity is boosting, is boosting their innovation capabilities. Needless to say actually there’s also a lot of research about that going on, but if you look at the results what you will find is actually that the results are fairly ambiguous, sometimes finding positive effects sometimes negative or maybe sometimes not at all, so there’s definitely something that is riddling us and there is missing a piece from the puzzle.
How interesting, so why did you write the paper?
well I think it the the fact that there is this assumption of a positive kind of boosting innovation boosting effect of diversity but with a lack of empirical support for it, I became really curious about what it is that we are not fully understanding here and what we are now proposing in the paper is the idea that maybe it has to do with where diversity in which type of teams diversity is actually is actually located and what we do here and I think that’s a very important distinction that hasn’t been made so far is distinguishing between top and middle management teams.
And why do you think it was so important to make this distinction?
yes, there is a tendency I think in the academic research on the topic and there is a broad topic on diversity management and how it is affected by particular management teams to but this literature really makes them makes a really an effort to understand the role of top managers, so there’s this idea that they these god-like heroic persons and figures who really kind of decide on the fate of companies, but of course they are important, but there is something in between so there are people also in the employee base like really doing the work and we of course have the middle managers who kind of put in place the strategies and implement them and our interest was actually an understanding the diversity that is across these teams so not just top management teams but also middle management teams.
How fascinating your topic, so which ones would you say are the key findings of your research?
yes and that is something that we that I think brings us a little bit back to the original kind of puzzle of why some studies find this positive fact others find no effect on innovation of diversity and others find maybe even a negative effect what we find in our paper is actually that it depends very much on whether we look at innovation inputs or innovation outputs, what we actually really can determine based on based on our analysis is that the innovation input that is the decision for example to invest in R&D and the decision on how much to invest in R&D is really driven by the top managers that is logical one would say because they are the ones controlling budgets but their diversity has fairly little influence on whether this money spent on innovation is used effectively, it is the diversity in the middle managers who really implement the strategies then that drives this you know these innovation outcomes.
How important that is so finally I want to ask you about the practical implications of your research in this case I assume specifically for managers what would you say there to top or middle manager managers about your research?
I think the the good news to start with and is that indeed diversity can be an important boost for innovation so the mission statements by companies like apple Lidl or Volkswagen are actually not wrong in the sense okay they they kind of creating a hype around this diversity thing and the end it doesn’t make a difference if we are diverse or not it is what we find a pool of diversity that really drives innovation, but what is important is not to look only at top management, top managers so really the upper echelons in a company but really look also at lower level, ranks for example middle management teams and in the broader sense in the broader sense also the whole employee base, so what we are promoting here is diversity management is important but it needs a holistic view.
Wow that’s uh great to know Torben thank you very much dankeschön I wish you all the best for your future research and hope to see you next time on a coffee break.
Thank you very much Lorena, it was really a pleasure.
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