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The Impact of a Firm’s Employee Diversity on U.S Tech Companies

In modern organizations, gender diversity is a significant issue, and it represents both a healthy culture and inclusivity. Despite efforts by human resource and employee management to include more women, disabled, blacks, and LGBTQ+ in the workplace, the corporate world remains a challenging place for women employees. The challenge, specific to tech companies, is associated with the understanding that men predominantly dominate tech organizations. The issue of gender diversity in the workplace is sensitive in two aspects: female employee contribution, and two, social perspective attributed to the contribution by these employees. The impact of an organization’s employee and management gender diversity on U.S. tech firms’ stock price for 2012-2019 forms the topic of analysis for this literature review.

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Modern decentralized ‘new economy’ continues to be an element of traditional ‘old school’ culture that still exists in the cultural status quo regarding women’s discrimination and inequality. Banks and Milestone (2010) argue that social relations detraditionalization and modernization within workplaces result from imbalance and gender stereotypes. However, despite the challenge of detraditionalization, the connection between the working environment and gender revolves around the gender-environment nexus (Nightingale, 2006). Through reconceptualizing gender, a dynamic relationship on the environment, gender, and cultural and social life elements become possible. From a human-environment interaction perspective, interactions should be centered on resources distribution (Nightingale, 2006). When interactions are centered on such distribution, female employees connect to the natural ecosystem through intimate relationships.

Gender diversity and organizational performance is valuable tool for organizations. When female employees assume leadership positions in firms, there is positive firm performance. Moreno-Gómez et al. (2017) use ROA and ROE as corporate performance indicators showed that with several women in leadership positions, particularly in developing countries, there is a more positive contribution to organizations. Women’s inclusion in a company’s board and team members, as top management, brings out cognitive diversity that is essential in value addition and enhances the potential of an organization (Moreno-Gómez et al., 2017). However, Gilley et al. (2019) show that with female board members, risks associated with performance and the negative reviews an organization face are minimized. Women in top employment positions improve corporate disclosure quality and reduce a firm’s likelihood of being exposed to share price cash risk (Qayyum et al., 2021). Gender alongside ethnic diversity is a good indicator in controlling how an organization performs.

Gender diversity can be a controversial issue in business, and the relationship between gender and ethnic diversity reflects several firm performance indicators in workplaces. Herring (2009) shows that an increase in gender and race inclusivity in organizations results in a performance increase of 3% and 9%, respectively, with consumer numbers rising by 200 and 400, respectively. However, social stress is a significant issue that is misapplied to female employee issues. Enhancing performance among female employees requires providing social support, which has a considerable impact on women than men (González-Morales et al., 2006). Verma (2020) argues that through age and gender diversity, companies can gain a competitive advantage through a profound comprehension of both male and female needs, which also has a positive relationship to performance. An organization’s sales performance can be positively impacted by incorporating a large amount of ethnic diversity.

No distinguishable difference exists that sets apart return on assets (ROA) and board representation. Despite the understanding, Simionescu et al.’s (2021) argument are that in the presence of more women on the board, the influence turns positive on the price-to-earnings ratio. However, it is essential to define the distinctions that exist between gender and sex. The differences are fundamental in understanding the shift in work perception from unpaid care and domestic work to online work (Hearn, 2019). Furthermore, organizations are less becoming a stable idea of what work looks. Change and fluidity are how modern companies are being characterized, and membership keeps shifting, same as network organizing and lean flexibilization, hence, demanding an innovative and new approach to workplace gender politics and discourse (Hearn, 2019). Even with the shift in organizational outlook, the significance of organization-wide and justice-based benefits cannot be overlooked.

Gender representation both vertically and horizontally is not equal between men and women in organizations. Fine et al. (2020) show that despite looking seemingly simple, the lack of equal gender representation is a highly complicated issue in workplace environments. While male and female employees may not be inherently different, they are not similar to the point of being considered one unit. Through the justice-based lens, less sex discrimination is associated with greater diversity and helps combat products associated with androcentrism (Fine et al., 2020). Further, a practical implication on gender diversity constitutes governance, innovation, firm and team performance, and occupational wellness. Therefore, welcoming gender diversity in organizations is critical since it helps stem evidence-based positive outcomes and is essential in highlighting the significance associated with organizational and workplace gender diversity at every level (Fine et al., 2020). When devising organizations’ initiatives and policies, firms should consider gender diversity due to its effectiveness in enhancing performance.

As time passes, the role of women in organizational performance is increasingly more valued. However, while gender diversity in the board may contribute to performance in leadership positions, failing to consider the educational background, director’s age, and industry experience may result in adverse outcomes (Suherman et al., 2021). Suherman et al. (2021) found out that gender diversity does not significantly influence a company’s performance after addressing endogeneity issues and controlling several factors. Developing on this, Kravitz (2003) claims that good reasons for gender diversity harm and help performance in a company. On the association, Kravitz (2003) illustrates by showing that when workgroup performance is hurt due to diversity, then the entire performance in a firm suffers, and likewise, the opposite is true. Frinks et al. (2003), using two studies, show that an organization’s productivity was not related to gender diversity, but profitability, on the other hand, had a positive relationship with an intermediate diversity level. An increasing focus on corporate management is equally associated with significant corporate failures and board diversity.

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Despite the increasing focus on board diversity, limited research exists on the benefits attributed to risk management and decision-making. Hutchinson et al. (2015), using data from top 500 firms in Australia, show that the role of the nomination committee and how directors are selected has to be determined based on board diversity. A board’s diversity has to be able to handle decision-making effectively and assess risks. Like Chen et al. (2015), Hutchinson et al. (2015) realized that a board with a designated nomination committee is significantly and constructively influenced by board gender diversity when controlling potential endogeneity. Through increased gender diversity, organizations have positive relations on demonstrating the moderating gender diversity effect on excessive risk-taking and financial risk and performance (Hutchinson et al., 2015). Further, female representation had the potential to increase gender diversity at the board.

The variables used in the researches constitute potential endogeneity, board selection, and gender diversity, organization performance, and top-level management. Based on these variables, Kravitz (2003), Frink et al. (2003), Htchinson et al. (2015), and Chen et al. (2015) can show the effect that gender diversity has on an organization’s performance. However, the former two argue the relationship might not necessarily be positive since any negative association with variety hurts group performance. The other explanatory variables from the researches consist of ethnic and workforce diversity.

Every research has used a specific number of participants that form part of the sample size used to collect information. Moreno-Gómez et al. (2017) show that information is collected from 54 Colombian listed companies, not other research that accounts for the sample size used. González-Morales et al. (2006) give the number of questionnaires used in the study, 1,340. Gilley et al.’s (2019) sample was 1829 observations across 262 firms, while Simionescu et al. (2021) used a sample of 71 companies while Wright (2016) utilized 38 semi-structured interviews. Sander et al. (2013) took 550 university students from the Netherlands and placed them in randomized teams of forty-five participants. The sample size for Kisaka et al. (2019) is 27,193 university employees in Kenyan, while Carol and Jason use a sample size of 432 major American corporations between 1997 and 2006. Dobbin and Jung (2010) do not conduct an empirical study, and therefore, they use reports from reputable agencies. Regardless of the approach, the effect of an organization’s performance is contingent on gender diversity.

The prediction methods used in the researches vary depending on the research approach used. While some researchers use qualitative studies, others use a quantitative research approach to predict the outcomes of their studies. Based on the processes used, the analysis technique used too depended on the research method. As shown, regardless of the research method and the study outcome, a relationship exists between gender diversity and performance in board members.

References

Banks, M., & Milestone, K. (2010). Individualization, gender, and cultural work. Gender, Work & Organization, 18(1), 73-89. Web.

Greider, C., & Sheltzer, J. (2019). Increasing gender diversity in the STEM research workforce. Science (American Association for the Advancement of Science), 366(6466), 692–695. Web.

Chen, L. H., Gramlich, J., & Houser, K. A. (2019). The effects of board gender diversity on a firm’s risk strategies. Accounting and Finance, 59(2), 991 – 1031. Web.

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Dobbin, F., & Jung, J. (2010). Corporate board gender diversity and stock performance: The competence gap or institutional investor bias. North Carolina Law Review, Review 89, 809 – 840. Web.

Fine, C., Sojo, V., & Lawford-Smith, H. (2020). Why does workplace gender diversity matter? Justice, organizational benefits, and policy. Social Issues and Policy Review, 14, 1, 36-72.

Frink, D. D., Robinson, R. K., Reithel, B., Arthur, M. M., Ammeter, A. P., Ferris, G. R., David, M. K., & Morrisette, H. S. (2003). Gender demography and organization performance: A two-study investigation with convergence. Group & Organization Management, 28(1), 127-147.

Gilley, K. M., Weeks, K. P., Coombs, J. E., Bell, M. P., & Kluemper, D. H. (2019).Board diversity, social performance, and CEO compensation. Journal of Business Strategies, 36(2), 1 – 27. Web.

González-Morales, M. G., Peiró, J. M., Rodríguez, I., & Greenglass, E. R. (2006). Coping and distress in organizations: The role of gender in work stress. International Journal of Stress Management, 13(2), 228–248. Web.

Hearn, J. (2019). Gender, Work and Organization: A gender-work-organization analysis. Gender Work and Organization, 26, 1, 31-39.

Herring, C. (2009). Does diversity pay?Race, gender, and the business case for diversity. American Sociological Review, 74(2), 208–224. Web.

Hutchinson, M., Mack, J., & Plastow, K. (2015). Who selects the “right” directors? An examination of the association between board selection, gender diversity and outcomes.Accounting and Finance, 55(4), 1071–1103. Web.

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Kisaka, L. G., Jansen, E. P. W., & Hofman, A. W. (2019). Workforce diversity in Kenyan public universities: an analysis of workforce representativeness and heterogeneity by employee gender and ethnic group. Journal of Higher Education Policy and Management, 41(1), 35–51. Web.

Kravitz, D. A. (2003). More women in the workplace: is there a payoff in firm performance? Academy of Management Perspectives, 17(3), 148-149.

Moreno-Gómez, J., Lafuente, E., & Vaillant, Y. (2017). Gender diversity in the Board, women’s leadership and Business Performance. Gender in Management: An International Journal, 33(2), 104–122. Web.

Nightingale, A. (2006). The nature of gender: Work, gender, and environment. Environment and Planning: Society and Space, 24, 165-186.

Sander, H., Hessel, O., &van Praag. M. (2013). The impact of genderdiversity on the performance of business teams: Evidence from a field experiment. Management Science, 59(7), 1514-1528. Web.

Simionescu, L. N., Gherghina, S. C., Tawil, H., & Sheikha, Z. (2021). Does board gender diversity affect firm performance? Empirical evidence from Standard & Poors 500 Information Technology Sector. Financial Innovation, 7, 1.

Suherman, M. R., Gatot, N. A., Adam, Z., Rini, S. W.(2021). The effect of gender diversity and the business expertise of female directors on firm performance: Evidence from the Indonesia Stock Exchange. International Journal of Business, 26(3), 39-52. Web.

Qayyum, A., Rehman, I. U., Shahzad, F., Khan, N., Nawaz, F., Kokkalis, P., & Sergi, B. S. (2021). Board gender diversity and stock price crash risk: Going beyond tokenism. Borsa Istanbul Review, 21(3), 269–280. Web.

Verma, A. (2020). Critical review of literature of the impact of workforce diversity (specifically age, gender, and ethnic diversity) on organizational competitiveness. Asian Journal of Management, 11(1), 125. Web.

Wright, T. (2016). Women’s experience of workplace interactions in male-dominated work: The intersections of gender, sexuality and occupational group. Gender, Work, and Organization, 23(3), 348–362. Web.

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