The Impact of Aging and Age Diversity on Company Performance

35 Pages Posted: 20 Feb 2009 Last revised: 10 Jun 2009

See all articles by Uschi Backes-Gellner

Uschi Backes-Gellner

University of Zurich - Institute for Business Administration; Swiss Leading House

Stephan Veen

University of Zurich - Department of Business Administration (IBW)

Date Written: January 2, 2009

Abstract

We examine how the age structure of a company's workforce affects company performance. Although, the effect of aging on individual productivity has been analyzed frequently, organizational productivity effects, which are more than the sum of individual productivities, have not. Furthermore, we do not only address the effect of changes in average age but also of changes in age diversity on organizational performance. We make a theoretical contribution by introducing a simple economic model to study the effects of workforce heterogeneity on company performance. The model provides a formal structure, i.e. cost and benefit curves, to analyze how changes in age diversity may affect organizational performance. We then break new ground by combining this economic model with theoretical insights and empirical results on aging and diversity from multiple and very diverse disciplines. As a result we derive empirically testable hypotheses which are tested in the empirical section based on a linked employer employee dataset with more than 18.000 German firms and 2 million employees.

We find new and innovative results. Although previous research has often found declining individual productivity effects with increasing age, we find that organizational productivity does not necessarily decline with average workforce age, particularly if changes in age diversity and type of tasks are controlled for. We also find that an increase in age diversity can have substantial positive productivity effects, particularly in innovative and creative companies. Our results are not only discussed in terms of statistical significance, but also with respect to economic importance and the consequences of demographic changes on organizational performance.

Keywords: Aging, Age-Diversity, Productivity, Demographic Change

JEL Classification: J10, J24, J82

Suggested Citation

Backes-Gellner, Uschi and Veen, Stephan, The Impact of Aging and Age Diversity on Company Performance (January 2, 2009). Available at SSRN: https://ssrn.com/abstract=1346895 or http://dx.doi.org/10.2139/ssrn.1346895

Uschi Backes-Gellner

University of Zurich - Institute for Business Administration ( email )

Plattenstrasse 14
8032 Zurich
Switzerland
+41 44 6344281 (Phone)
+41 44 6344370 (Fax)

Swiss Leading House ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Stephan Veen (Contact Author)

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

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