Gender diversity and innovation in technology and manufacturing companies

University essay from Blekinge Tekniska Högskola/Institutionen för industriell ekonomi

Abstract: In this thesis the relation between gender diversity and innovation in technology and manufacturing companies is explored. Data on firm-level are used from The Enterprise Surveys of the World Bank, which are designed as a panel data survey and comprise a collection of data on 146,000 firms in 143 countries, from years 2006 to 2019. Our focus group is technology and manufacturing firms, therefore, the final data used comprises of 8,839 firms in 47 countries for the year 2013 to investigate whether gender diversity is positively related to innovation of technology and manufacturing firms. Binary logistic regression analysis is used due to the nature of the available data measuring innovation output, which is the survey answer whether a firm introduced a new product/process or not. There are controversies in current research findings caused by the classification of incremental and radical innovation, therefore, this thesis takes an inclusive approach that accounts for total innovation (both incremental and radical). We also assess the total innovation in terms of new products and processes. Gender diversity is measured as total gender diversity of the permanent full-time employees and also on top management level. We also control for industry type, firm size, firm structure, firm’s export activity, R&D investment and employee training. The results show that there are currently low levels of gender inclusion on various firm levels globally. The regression analysis shows that only female presence on top management level made a unique statistically significant contribution to the model, and not total gender diversity on employee level. Regarding the control variables, only firm size, having invested in R&D, and offering employee training made a unique statistically significant contribution to the model. Conclusively, we found that gender diversity on top management level is positively related to innovation performance of technology and manufacturing firms, but not on employee level. However, due to the nature of panel data surveys when it is not possible to lag the cause with respect to the effect, a ‟cause-effect” relationship cannot be deduced with confidence. Nevertheless, our results are in line with the existing theory which indicates that gender diversity on leadership level may have a small but positive effect on achieving firm goals and innovative ideas-decisions-strategies. An explanation why we did not find a positive relationship on employee level can be the fact that during the innovation process the role of individuals and thus gender is invisible - hidden within processes, organizations, systems and there is lack of separating creativity from implementation; employee diversity might improve the creative process but impede the implementation. It is probably easier to assess the role of individuals on top management level and compare the effect of different leadership styles across companies. For external observers this assessment seems more complicated on employee level, thus the benefits of gender diversity even on employee level should not be underestimated. Therefore, more gender diversified quota and policies may need to be taken by decision makers with potentially positive impact both on society and economy. The relationship between innovation and gender diversity is a rather complex subject, affected by many internal and external firm contexts. By accounting for control variables including firm size, structure, export activity, R&D investment, employee training and industry type, some possible causal factors are eliminated. As prior research has already indicated, other factors that have not been addressed yet (and not covered by our framework either) are firm level structures, capabilities, innovation strategies, management style, team structure-functional diversity.

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