Study: Diverse Companies Are More Innovative

diverse companies innovation

Companies that promote diversity are more innovative, according to a new study from N.C. State University’s Poole College of Management.

Co-author Richard Warr said companies that foster a diverse work force—in terms of race, gender and sexual orientation—tend to introduce more new products and create more patents. Those patents, in turn, are cited elsewhere more often.

“You know every company says, ‘We value diversity,'” said Warr. “It’s whether or not they actually have hard policies in place that would actually have kind of meaningful effects on diversity in the workforce.”

Warr said this goes beyond “managerial indulgence,” wherein an already-successful company offers more rewards to more employees. It’s well-established that diverse teams devise more creative solutions. But this research shows that strong diversity policies actually cause greater innovation.

“The data says that increasing the diversity policy does lead to an increase and patents and citations, but the reverse does not occur,” he said.

The benefits aren’t limited to big, progressive tech companies in Silicon Valley, Warr added. Service, construction and manufacturing firms that promote the advancement of employees with diverse race, gender and sexual orientations also tend to be more innovative. Warr said this holds true if you take California out of the mix altogether.

“We look at 49 states of data, and we find the same results hold. So it’s not being driven by just the really big tech companies, which are…allegedly great places to work,” he said. “It’s much more widespread throughout the economy.”

On the flip side, Warr said companies with negative events or scandals regarding employee diversity tend to be less innovative.

The paper was co-authored by Roger Mayer of N.C. State and Jing Zhao of Portland State University. Their study has been published in the journal “Financial Management.”

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