Workforce Composition and Innovation: How Diversity in Employees’ Ethnic and Educational Backgrounds Facilitates Firm-Level Innovativeness

Journal of Product Innovation Management, Forthcoming

55 Pages Posted: 4 Dec 2016

See all articles by Ali Mohammadi

Ali Mohammadi

Copenhagen Business School - Department of Strategy and Innovation; KTH Royal Institute of Technology

Anders Broström

Royal Institute of Technology (KTH); Royal Institute of Technology (KTH) - Center of Excellence for Science and Innovation Studies

Chiara Franzoni

Politecnico di Milano - DIG

Date Written: October 10, 2016

Abstract

In this paper, we study how workforce composition is related to a firm’s success in introducing radical innovations. Previous studies have argued that teams composed of individuals with diverse backgrounds are able to perform more information processing and make deeper use of the information, which is important to accomplish complex tasks. We suggest that this argument can be extended to the level of the aggregate workforce of high technology firms. In particular, we argue that ethnic and higher education diversity within the workforce is associated with superior performance in radical innovation. Using a sample of 3,888 Swedish firms, we find that having greater workforce diversity in terms of both ethnic background and educational disciplinary background is positively correlated to the share of a firm’s turnover generated by radical innovation. We also find that having more external collaborations reduces the importance of a workforce with a diverse disciplinary background, while the impact of ethnic diversity is not affected by external collaboration. Our findings hold after using alternative measures of dependent and independent variables, alternative sample sizes, and alternative estimation techniques. These include instrumental variable estimation as well as structural equation modeling for simultaneous estimation of diversity, R&D intensity, and external search.

Keywords: Ethnic diversity, Education diversity, External search, Radical innovation

Suggested Citation

Mohammadi, Ali and Broström, Anders and Franzoni, Chiara, Workforce Composition and Innovation: How Diversity in Employees’ Ethnic and Educational Backgrounds Facilitates Firm-Level Innovativeness (October 10, 2016). Journal of Product Innovation Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2878657

Ali Mohammadi (Contact Author)

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

KTH Royal Institute of Technology ( email )

Stockholm
Sweden

Anders Broström

Royal Institute of Technology (KTH) ( email )

Lindstedtsvägen 30-100 44
Stockholm, SE-100 44
Sweden

Royal Institute of Technology (KTH) - Center of Excellence for Science and Innovation Studies ( email )

Drottning Kristinas väg 30
Stockholm, SE-100 44
Sweden

Chiara Franzoni

Politecnico di Milano - DIG ( email )

Piazza Leonardo da Vinci
Milan, Milano 20100
Italy

HOME PAGE: http://www.dig.polimi.it/index.php?id=348&tx_wfqbe_pi1[id]=438

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