Diversity Boosts Innovation, New Research Finds

January16, 2018

Companies are taking note: The more diverse our work force — one that encompasses the wide variety of backgrounds, gender, race and ethnicity, sexual orientation — has a demonstrable effect on innovation and creativity in organizations. This is confirmed by findings from a new study from North Carolina State University.

As described in this summary, the research found that taking steps to foster diversity makes a company more innovative, in terms of product innovations, patents created and citations on patents — which means that the relevant innovations are also used to develop new technologies.

According to co-author Richard Warr, “We wanted to know whether companies with policies encouraging the promotion and retention of a diverse workforce — in terms of gender, race and sexual orientation — also perform better at developing innovative products and services. The short answer is that they do.”

He added, “To be clear, we found that there is a causative link — it’s not just a correlation, and the finding extends across a broad range of industry sectors.”

The method of the study, described here and published in the journal Financial Management, was co-authored by Roger Mayer of NC State and Jing Zhao of Portland State University. “Basically, once you get through all the statistical jargon, we found that a company that checks all of the diversity boxes would see about two new additional product announcements over 10 years,” Warr said. “Given that most firms produce an average of two new product announcement per year, that’s significant. On the other hand, it shows that improving diversity policies won’t lead to overnight improvements in innovation. It may take time to reap the benefits.

The upshot of the study was that a business which relies on innovation will benefit significantly from supporting diversity within its organization. “It’s really that simple,” Warr concluded.

Credit: NAMIC