Diversity Increases Innovation

By: Marie Donlon

Diversity equals innovation so says a recent study on the subject.

 "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," says Richard Warr, co-author of a paper on the study and head of the Department of Business Management in NC State's Poole College of Management. "The short answer is that they do.”

“To be clear, we found that there is a causative link — it's not just a correlation," Warr says. "And the finding extends across a broad range of industry sectors."

Researchers looked at data on patents created and citations on patents from the U.S. patent office and information concerning new product announcements during the years 2001 and 2014 against diversity policy data from the 3,000 largest publicly-traded companies in the U.S.

"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 says. "Given that most firms produce an average of two new product announcements 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 take-home message here is that a business which relies on innovation will benefit significantly from supporting diversity within its organization," Warr says. "It's really that simple."

The study is published in the journal Financial Management.