Transforming research on diversity and firm performance: A dynamic capabilities perspective

Despite a growing body of literature on diversity and firm performance, our review of research across fields, theoretical traditions, and levels of analysis suggests that the relationship is not a simple one. However, we attempt to integrate theory and research from macro and micro research domains into one perspective on the firm-level performance effects of diversity. We review the results of research on diversity and firm performance based on the level of analysis at which diversity was examined, highlighting what we know and do not know about this relationship, and why a new approach to research in this area is needed. To set a future research agenda, we introduce a dynamic capabilities framework for studying diversity and firm performance, identifying a subset of capabilities through which we would expect firms to extract benefit (or loss) from diversity and articulate the underlying mechanisms through which such effects are likely to occur. By putting forth this framework, our goal is to offer an integrative, process-based perspective for understanding value creation and capture as it pertains to diversity, and encouraging a more systemic approach to the study of diversity and firm performance.