Cultural diversity and innovation

CULTURAL DIVERSITY AND INNOVATION

1. Preface

This paper is written as an assignment for the course: Societal Developments and Institutions. This paper contains a literature study for the workgroup cultural diversity, by a first year master student organization studies at the University of Tilburg. This paper is written with the help and suggestions of my teacher, mister Mutsaers, who provided some helpful articles to start this paper.

3. Introduction

3.1 Research problem

In the Netherlands we live in a multicultural society. In this society there are a lot of members with lots of different cultural backgrounds. These members of the multicultural society will have to work together in organizations. Groups in organizations have become more diverse in terms of their demographic composition over the years and will continue to become more diverse in years to come (Jackson, 1992; Triandis, Kurowski, & Gelfand, 1994; Williams & O’Reilly, 1998). Also the process of globalization leads to organizations with members with different cultural backgrounds. According to Cox and Blake (1991) the recent business trends of globalization and increasing ethnic diversity are turning managers’ attention to the management of cultural differences. Numerous companies have discovered that increasing the diversity of their workforce pays off in improved performances (Curseu, 2007). According to Cox and Blake (1991) a well managed, diverse workforce holds potential competitive advantages for organizations. However not all scientific research comes to the same conclusions. Research on the relationship between workgroup diversity and performance has yielded inconsistent results (van Knippenberg, 2004). This inconsistency in results on the relationship between cultural diversity and organizational performances provides a great opportunity for further research. This literature study will focus on one specific part of organizational performance, namely innovative performance. Innovative performance is important for organizations because innovativeness stimulates economic development by fueling the engines of corporate growth (Schumpeter 1934, Penrose 1959). Without it, firms eventually wither and die.

Advocates of the value-in diversity hypothesis suggest that work team heterogeneity promotes creativity and innovation (Cox & Blake, 1991). Since cultural diversity is one aspect of work team heterogeneity, this would mean that cultural diversity also has a positive effect on organizational innovative performance. This study will examine the advantages and disadvantages of cultural diversity on organizational innovative performance, in order to find out what the effects of cultural diversity are on an organizations innovative performance.

3.2 Research goal.

The goal of this research is to find out what the advantages and disadvantages of cultural diversity within organizations are with respect to the innovative performance of the organization.

3.3 Research Question

The research question of this paper is: What are the effects of racial diversity in organizations on the innovative team performance?

3.4 Research relevance

– Social relevance

The social relevance of this paper is probably very low. This paper only examines the advantages and disadvantages of cultural diversity in organizations on innovative performance of organizations. There won’t be any solutions provided that will have an impact on society.

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– Practical relevance

The practical relevance of this paper is that when managers of organizations want to find out what the effects of cultural diversity are for the innovative performance of their organization they could study this paper and use the results to decide how cultural diverse they want their work teams to be, that is working on innovations, so they could come to a high organizational innovative performance.

– Scientific relevance

Unfortunately, research on the positive and negative effects of work-group diversity has largely developed in separate research traditions, and an integrative theoretical framework from which to understand the effects of diversity on team performance is missing (Guzzo & Dickson, 1996; Kozlowski & Bell, 2003; Williams & O’Reilly, 1998). This paper will not research the positive and negative effects of all kinds of diversity within organizations on all kinds of group performances, but it will integrate the positive and negative effects of cultural diversity within organizations on the innovative performance of the teams in the organization. So this research could be seen as a start of integrating separate research traditions. So further research could build on this paper.

4. Theoretical background.

In this paper literature is researched and analyzed, in order to answer the question: What are the effects of racial diversity in workgroups on the innovative team performance?

To answer this question a few important concepts will be used. The first concept used in this thesis is diversity.

The term diversity often provokes intense emotional reactions from people who, perhaps, have come to associate the word with ideas as “affirmative action” and “hiring quotas” ; yet it is a word that simply means “variety” or a “point of respect in with things differ” (American Heritage Dictionary of the English Language, 1993; Webster’s Dictionary of the English Language, 1992). Diversity refers to differences between individuals on any attribute that may lead to the perception that another person is different from self (e.g., Jackson, 1992; Triandis et al., 1994; Williams & O’Reilly, 1998).

This first concept is a very general one. For the sake of this paper this definition has to be narrowed down. In this paper we will study team diversity.

Team diversity is a group characteristic that reflects the degree to which there are objective or subjective differences between people within the team (van Knippenberg & Schippers, 2007). These may be differences in demographic characteristics such as age, gender, or ethnicity, in job-related characteristics such as functional background or organizational tenure, in more deep-level (Harrison, Price, & Bell, 1998) psychological characteristics such as personality, attitudes, and values, or on yet other dimensions of differentiation ( Dijk, Engen, & Knippenberg, 2009). In an effort to organize thinking about different types of diversity some researchers (Cummings, Zhou & Oldham, 1993; Jackson, 1992; Jackson, May & Whitney, 1995; Maznevski, 1994; Tsui, Egan & O’Reilly, 1992) have suggested ways of categorizing different types of diversity (Milliken & Martins, 1996). One common distinction is between diversity on observable or readily detectable attributes such as race or ethnic background, age or gender, and diversity with respect to less visible or underlying attributes such as education, technical abilities, functional background, tenure in the organization or socio-economic background, personality characteristics, or values (Cummings et al., 1993; Jackson et al., 1995; Tsui et al., 1992)

In this paper the focus is on one of the observable attributes of diversity, namely: racial diversity. Racial diversity is the diversity within teams in race.

The second important concept of this paper is a team. Teams can be defined as a set of two or more actors who interact dynamically, adaptively and interdependently who share common goals or purposes; and who have specific roles or functions to perform (Salas et al., 1992). This paper studies teams, because organizations are increasingly relying on teams for innovation (Ilgen, Hollenbeck, Johnson, & Jundt, 2005). Different articles use different names for teams. In a lot of articles the auteur refer to work groups. When the term work group is use in another article, it will be changed into teams so that this paper will be more consistent.

The third important concept in this paper is radical innovation. Radical innovations are fundamentally different from things invented before and they represent revolutionary changes in technology. They lie at the core of entrepreneurial activity and wealth creation (Schumpeter, 1975).

5. Methodology

5.1 Research approach

This research could be described as explorative, because it combines literature of cultural diversity with literature on organizational performance and innovative performance in a way that results in a clear overview of advantages and disadvantages of cultural diversity on innovative performance. This overview is still missing in the literature so far. So this paper really explores the effects of cultural diversity on innovative performance in a way that hasn’t been done before.

5.2 Data collection

To find literature for this thesis the website www.webofscience.com will be used. The articles you can find on this website conform to the ISI-norms. These norms make sure that the article are from a high quality.. The methodology used in the articles to come to results have to be convincing so that the results are valid. When the article is considered useful for this thesis the whole article will be analyzed carefully. Also the website Google scholar and the online library of the University of Tilburg will be used to find literature about the main concepts of this thesis.

To search for literature key words will be typed in at the search functions of the sites. The key words that will be used are:, cultural diversity, innovation, radical, team, organization, performance, work groups. These key words will be used in different combinations.

The literature used in this thesis will be analyzed by first reading the abstract and discussion/conclusion parts of the articles. The articles are considered relevant when the topics of the articles have a connection to the topic of this thesis. When this is the case the articles will be selected. By doing this time will be saved by not reading a lot of irrelevant literature.

Ones articles are selected the snowball function that the web of science offers will be used to find more literature. Snowballing can happen forwards (who cites the article) and backwards (who are cited in the article) by looking at the reference list of the articles. Both kinds of snowballing will be used in this thesis. Of course there will also be searched for more articles of the same writer, to find out if this writer has written more relevant articles for this thesis.

5.3 data analyses

The articles will be systematically analyzed. The articles will be read to see what they are about exactly. The articles that are about the effects of racial diversity on team performance will get a number.

Author

Article

number

The key ideas of the article will be summarized so that it will be easy to find back which articles are about which topic. A distinction will be made between positive and negative effects on team performance. So the effects of racial diversity on team performance that have been found in articles will be easy to find back in the table.

Article number

Negative effects

Positive effects

6. results

Effects of racial diversity on innovative team performance

Diversity is a characteristic of a group of two or more people and typically refers to demographic differences in one sort or another among group members (McGrath, Berdahl, Arrow, 1995). Researchers’ predictions about any one diversity variable differ depending on which of the dimensions they see as critical to determining its impact (Ely & Thomas, 2001). Pelled (1996) predicted that racial diversity, as a source of visible differences, would incite intergroup bias and lead to negative outcomes for teams. But racial diversity could also have positive outcomes when you look at it from a different perspective. Cox, Lobel and McLeod (1991) predicted that racial diversity, as a source of cultural differences, would enhance creative problem solving and lead to positive outcomes for teams. In another study , McLeod and Lobel (1992) found that teams that are heterogeneous with respect to the ethnic backgrounds produced higher quality ideas on a brainstorming task than more homogeneous teams did (Milliken & Martins, 1996). Other researchers have found results that suggest that racial diversity could both have positive and negative effects on teams in organizations. More specifically, diversity in a team can produce lower cohesion and miscommunication among group members, which can lead to team conflict (Jehn, 1995). Some of this conflict may be productive—if, for example, it avoids “groupthink” and brings additional points of view into the discussion—whereas other forms may worsen team performance (Kochan et.al., 2003).

Findings on the effects of racial diversity on team performance have been inconsistent in the literature so far. In some teams, diversity may improve performance, while in other teams, diversity may be detrimental to performance (Jackson, 1992; Jehn et al., 1999; O’Reilly & Flatt, 1989; Richard, 2001; Steiner, 1972).. For example, the effects of diversity on team performance might be more favorable if group leaders and members build on team members’ creativity and information (Kochan et.al., 2003). In this paper the effects of racial diversity are studied on one particular kind of team performance, namely the innovative performance of teams. The type of innovation that is discussed in this paper is radical innovation. Racial diversity will be more positively related to performance, the more performance is contingent on the in-depth processing and integration of task-relevant information and perspectives (van Knippenberg et al., 2004). That is, if diversity’s potential benefits derive from a process of exchanging and integrating diverse information, knowledge, and perspectives, diversity’s benefits should be more evident the more task performance can be expected to benefit from information elaboration (Dijk, Engen, & Knippenberg, 2009).This is the case much more for complex, knowledge-intensive tasks requiring the generation of non-routine solutions to complex problems and complex decisions than for more simple and routine task with lower information-processing requirements (Jehn et al., 1999). In line with this argument, a small meta-analysis of 13 studies by Bowers et al. (2000) confirmed this prediction, showing that diversity was positively related to team performance for complex tasks but negatively related to performance for simple tasks (Dijk, Engen, & Knippenberg, 2009). Since the creation of radical innovations can be considered as one of these complex tasks, it can be assumed that racial diversity has a positive effect on the team´s innovative performance. Innovation requires a creative spark and out-of-the-box thinking (Zhou & Shalley, 2008). Diversity may be particularly conducive to such out-of-the-box thinking, because the exchange and integration of diverse perspectives may stimulate new ways of looking at the issues at hand and the need to integrate divergent perspectives may give rise to more creative solutions to problems and more innovative products (Paulus & Nijstad, 2003; van Knippenberg et al., 2004). That’s why according to van Dijk, Engen, & van Knippenberg, innovation teams may have more to gain from diversity than other teams.

A very important factor to improve an team´s innovative performance is the creation of ideas. The insights, skills, and experiences employees have developed as members of various cultural identity groups (racial diversity) are potentially valuable resources that the work group can use to rethink its primary tasks and redefine its markets, products, strategies, and business practices in ways that will advance its mission (Ely & Thomas, 2001). The greater the informational resources available to the team, the more the team should be able to reach an in-depth understanding of the task, solve problems encountered in the course of task performance, and reach high-quality outcomes in terms of the creativity, innovation, and overall quality of the team’s products, ideas, or decisions (Dijk, Engen, & Knippenberg, 2009) .The differences in information and viewpoints may also give rise to task conflict and dissent; faced with the need to solve these conflicts and reconcile opposing views, team members may engage in more elaborate processing of task-relevant information and search for more creative problem solutions than would be the case in the absence of conflict and dissent (Knippenberg, de Dreu, & Homan, 2004). As a result, task conflict and dissent may be associated with better and more creative team performance (e.g., De Dreu, Harinck, & van Vianen, 1999; Tjosvold, 1998). There is some literature suggesting that task conflict is negatively related to team performance (De Dreu & Weingart, 2003b), and others state that it is not so much the presence or absence of conflict but instead the way conflicts are managed that helps or hinders teams to perform effectively (De Dreu & Weingart, 2003a; Lovelace, Shapiro, & Weingart, 2001; Simons & Peterson, 2000; Tjosvold, 1998). Third, and perhaps most important, performance does not benefit from conflict and dissent per se but from the process that conflict and dissent is assumed to promote: the deep-level and creative processing of diverse information and viewpoints (Knippenberg, de Dreu, & Homan, 2004). However, the exchange of diverse information, ideas, and viewpoints may also stimulate such in-depth processing without conflict or dissent (Knippenberg, de Dreu, & Homan, 2004). This is why racial diverse teams can outperform, more homogeneous teams. The proposition that diverse teams may outperform more homogeneous teams follows from the reasoning that the exposure to more diverse information and perspectives may promote elaboration of task relevant information (Knippenberg, de Dreu, & Homan, 2004).This, in turn, would be expected to lead to more thorough and creative information processing, problem solving, and decision making. Such expected outcomes, then, give rise to the proposition that diversity may benefit performance to the extent that performance requires information processing, creative and innovative idea generation and problem solving, and/or high quality decision making (Knippenberg, de Dreu, & Homan, 2004), such as innovative performances. So whether racial diversity stimulates task-conflict or not, the fact that racial diversity promotes differences in information and viewpoints remains. These differences in information and viewpoints are beneficial for creativity, which results in improved innovative team performance. So as a result this papers states that, racial diversity has a positive effect on innovative performance through the enhanced creativity of the team, because of the differences in information and viewpoints that racial diversity provides.

Organizations may increase their number of racial minorities, to better match the demographic characteristics of their significant customers in order to achieve a competitive edge in the market (Cox, 1994). As racioethnic populations (minorities), increase as a ratio of the whole population, it behoves organizations to adjust their human resource mix to reflect the target market they are attempting to reach (Richard, 2000). As firms reach out to a broader customer base, they need employees who understand particular customer preferences and requirements (Morrison, 1992). According to Cox & Blake (1991), the insights and cultural sensitivity, that racial diversity, brings to a marketing effort improve an organizations ability to reach different market segments. These insights and cultural sensitivity can be of great important to the organization for the creation of new business ideas and the creation of innovations. It means that the organization has to compose racial diverse teams in order find out new market opportunities and business ideas. So from this perspective racial diversity has an positive effect on innovative team performance.

Racial diversity also has a positive effect on innovative performance from a resource-based point of view. Human resources, particularly diverse resources, are protected by knowledge barriers and appear socially complex because they involve a mix of talents that are elusive and hard to understand (Lippman & Rumelt, 1982). Knowledge-based resources depend upon large numbers of people of teams engaged in coordinated, creative action providing a firm competitive advantage (Barney, 1991; Hart, 1995). Therefore, an team with a diversity of perspectives should have more resources to draw on and should be more creative and innovative (Richard, 2000).

Maznevski (1994), suggested that racial diversity, as a source of inherent and immutable differences, would provide teams with different kinds of information from which they could potentially benefit, but such differences would often be difficult for parties to understand and accept. These different kinds of information are especially valuable for the innovative performance of team. The different kinds of information are important for the creation of new ideas that could evolve in successful innovations. The fact that different parties could have problems with understanding the information and accepting it, seems very relevant for innovation projects, since innovative performance is depending on the creation of new ideas. So from this perspective racial diversity could have a positive, as well as a negative, effect on innovative team performance depending on how the problems with understanding the information and accepting it, are managed.

Another important variable when looking at the influence of racial diversity on team performance is power differences. There is much theoretical and empirical support for the notion that paying attention to differences in power and status is critical for understanding diversity in organizations (Ely & Thomas, 2001). According to Aldefer (1987) the distribution of power among cultural identity groups, both inside the organization and in the larger society, is key to how people think, feel and behave at work. Ely and Thomas (2001) state that different racial groups holds different status and power. In organizations, status differentials are reinforced when higher-status identity groups are disproportionately represented in positions of organizational authority and are challenged when they are not (Alderfer, 1987; Lau & Murnighan, 1998). The distribution of power within could than have a negative as well as a positive effect on team´s innovative performance. For racial diversity to have a positive impact on team performance, different identity groups should be equally distributed throughout the hierarchical position within the organization, so that there is not one overruling way of thinking within the organization.

Another negative effect from racial diversity is, that differences in race could lead to the formation of subgroups. The social categorization perspective holds that similarities and differences are used as a basis for categorizing self and others into groups, with ensuing categorizations distinguishing between one’s own in-group and one or more out-groups (Knippenberg, de Dreu, & Homan, 2004). Racial diversity, as part of the social categorization perspective, is one of these factors that lead to the categorizations. People tend to like and trust in-group members more than out-group members and thus generally tend to favor in-groups over out-groups (Brewer, 1979; Tajfel & Turner, 1986; Turner, Hogg, Oakes, Reicher, & Wetherell, 1987). Consistent with research on similarity/attraction (Williams & O’Reilly, 1998), this signifies that team members are more positively inclined toward their team and the people within it if fellow group members are similar rather than dissimilar to the self. Moreover, categorization processes may produce subgroups within the team (i.e., “us” and “them”), and give rise to problematic inter-subgroup relations (Knippenberg, de Dreu, & Homan, 2004). As a result, the more homogeneous the team, the fewer relational conflicts will occur (Jehn et al., 1999; Pelled, Eisenhardt, & Xin, 1999). Since racial diversity increases the heterogeneity of the team, the assumption is that racial diversity, as a source of visible differences, would incite intergroup bias and lead to negative outcomes for teams. These negative outcomes also occur in innovative workgroups. When organization are trying to innovate, they often put members of different teams (or organizations) together to come up with these innovations. This would mean that the intergroup relations of members of these different teams (or organizations) should be good. But categorization processes may produce subgroups within the team and give rise to problematic inter-subgroup relations (Knippenberg, de Dreu, & Homan, 2004). When this is the case the team´s innovative performance will decrease, because the problematic inter-subgroup relationships increase emotional conflict. In contrast to the earlier mentioned task conflict, emotional conflict tends to diminish performance (Pelled, Eisenhardt, & Xin, 1999).

Racial diversity can also have an impact on commitment. Findings suggest that individuals who are different from their team in racial background tend to be less psychological committed to their organizations (Tsui et al., 1992). Another result from this same research has indicated that absents takes places more often in racial diverse teams, than in teams that or more homogeneous when it comes to racial backgrounds. Tsui et al., (1992), also state that racial diverse members are less inclined to stay with the organizations, which implicates a higher amount of turnovers in racial diverse work teams. Although these effects are more on a individual level they could impact the whole organization. When the dissatisfied members leave the organization, the organization will then become more homogeneous and the positive effects of racial diversity could than possibly disappear.

7. Conclusion

As a conclusion it is fair to say that racial diversity both has negative as well as positive effects on team performance. The negative effects of racial diversity on team performance are:

– Lower cohesion

– Intergroup bias

– Miscommunication

– Group conflict (can also be positive)

– Difficult to understand and accept information

– Relational conflict

– Decreased commitment

– More turnover.

Even though racial diversity can have negative effects on the performance on teams, this paper has shown that there are also a lot of positive effects from racial diversity on team performance. These positive effects are:

– Out of the box thinking

– Higher quality ideas

– Creative problem solving

– Task conflict

– Creation of new ideas

– Deep-level and creative processing of diverse information and viewpoints

– Better match the demographic characteristics of their significant customers

– The insights and cultural sensitivity, that racial diversity, brings to a marketing effort improve an organizations ability to reach different market segments

– Different kinds of information

This paper has shown that especially these positive effects are very relevant when looking at the radical innovation performance of teams. The creation of radical innovations is a complex task, that requires creative thinking, diverse information and multiple perspectives, since all innovation starts with creative ideas (Amabile, 1996). So it are the positive effects that are extremely relevant in the case of radical innovation. This is why racial diversity increases a team´s radical innovation performance.

8. Discussion

Theoretical implications

The goal of this research was to find out what the advantages and disadvantages of cultural diversity within a team are with respect to the innovative performance of the a team. By studying literature on racial diversity this paper has come to a clear overview of positive and negative effects. The practical relevance of this study is that the results have shown that especially the positive effects of racial diversity are beneficial for the creation of radical innovations in teams. This could be usefully for managers of organization, trying to increase the innovative performance of the organization. They should try to increase the diversity of the teams in their organizations.

The scientific relevance of this paper is that it has separated racial diversity from other types of diversity. A lot of literature mixes different types of diversity in their studies, which makes it unclear what the effects of different types of diversity are on team performance. This paper has provided a clear overview of the effects of one type of diversity, namely racial diversity, on one type of team performance, namely innovative performance.

As stated before, the social relevance of this study will be low, since it is not likely that this paper will have an impact on society.

Managerial implications

This research could be very useful for managers as innovation is a key factor in organizations’ ability to create a sustainable competitive advantage (cf. Zhou & Shalley, 2008) and organizations are increasingly relying on teams for innovation (Ilgen, Hollenbeck, Johnson, & Jundt, 2005). This makes it important for managers to compose the right teams to work on innovation project. This paper has shown that it is best for managers, to compose a team that is racial diverse, since racial diversity has positive effects on the innovative outcomes of teams.

Limitations and recommendations

One of the limitations of this paper is that there are only a limited amount of articles studied. There are so many articles about different types of diversity and their effects on group performance that it is hard to take them all into consideration. Another limitation is that research doesn´t include moderation effects. Some authors have indicated that since both negative as well as positive effects of racial diversity have been found, it is time to do more research about moderating effects. As van Knippenberg, De Dreu, & Homan (2004) say it: `The state of the science thus suggests that in order to advance our understanding of the relationship between diversity and performance, we should look for moderators of the diversity-performance relationship`. This is a recommendation for further research on the topic of the effects of racial diversity on team performance.

Another recommendations is that more research, that directly studies the relationship between racial diversity and innovative team performance is needed. This paper has studied effects of racial diversity on group performance, and then made a link to innovative performance, by using the characteristics of radical innovations. A direct research could increase the reliability of the results that were found in this research.

9. references.

Aldefer, C.P. (1987). An intergroup perspective on group dynamics. Handbook of organizational behavior. 190-219

Cox, T.H., & Blake, S., (1991). Managing cultural diversity: implications for organizational competitiveness. Academy of Management Executive, 5 (3):45-56

Ely, R.J. & Thomas, D.A. (2001). Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes. Administrative Science Quarterly, 46(2): 229-273.

Curseu, P.L. (2007). Complexity in organizations. Pearson Education Ltd. London GB.

Ilgen, D. R., Hollenbeck, J. R., Johnson, M., & Jundt, D. 2005. Teams in organizations: from input-pr