Identity, Diversity, and Team Performance: Evidence from U.S. Mutual Funds
62 Pages Posted: 31 Jan 2020 Last revised: 22 Sep 2021
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Identity, Diversity, and Team Performance: Evidence from U.S. Mutual Funds
Date Written: January 2020
Abstract
We examine team diversity and performance in the asset management industry through the lens of identity. Focusing on political ideology as the relevant dimension of identity, we find that diverse teams outperform homogeneous teams. The mechanism involves both improved decision-making due to more diverse perspectives and increased monitoring by heterogeneous team members. The benefits of ideological diversity are undone when political polarization is higher, consistent with increased intra-team conflict. In examining why less diverse teams are prevalent in asset management, we find entrenched managers prefer homogeneous teams, and the local labor market supply of ideologically diverse managers is constrained.
Keywords: Â Mutual fund, Campaign Contributions, Dispersion in Beliefs, diversity, Labor incentives, PACs, Polarization, Political Ideology, Teams
JEL Classification: G11, G23, J33, J44, L22, L25, L84, M12, M52
Suggested Citation: Suggested Citation
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Identity, Diversity, and Team Performance: Evidence from U.S. Mutual Funds
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