From inclusion to innovation: using an agent-based simulation to unravel the micro-mechanisms of the macro-level tolerance-innovation link

Purpose This research aims to unravel the micro-mechanisms that underpin the macro-level correlations between cultural tolerance and innovation. Our study centers on the micro-mechanisms of indirect minority influence among workers with diverse domain expertise. We posit that influence stemming from minorities who have different domain expertise in workers’ collaboration networks can be a pivotal driver for organizational innovation in changing market environments, and cultural tolerance is critical for such minority-induced social innovation. Design/methodology/approach The model includes components such as tolerance, cognitive diversity and network structure and examines the organization’s ability to adapt to changing market conditions and foster innovation. Through simulation experiments, we seek to identify a potential optimal combination of micro-mechanisms – direct majority influence, indirect minority influences and cross-domain consistency – that enables organizations to rapidly adapt to new market environments. Findings Our systematic simulation experiment identified the sweet spot of tolerance and consistency that produced robustly faster adaptation speed in response to abrupt market shifts. Organizational culture characterized by a medium level of tolerance (t = 0.6) and a small consistency (κ = 0.05) facilitated rapid adaptation to new market needs. It should be emphasized that this level of tolerance corresponds to interacting in a balanced way with people with similar domain expertise and those with differing domain expertise, with slightly more interaction outside of one’s group than within it. This finding provides evidence that indirect minority influence can be a micro-mechanism underlying the link between cultural tolerance and innovation. Intriguingly, our simulation experiment also revealed that a decrease in tolerance from 0.6 to 0 necessitates an increase in the level of consistency (from 0.05 to 1) to optimize the adaptation speed. This implies that organizations with a tight culture might need to go further and increase cross-domain consistency – in other words, further tighten across domains – to ensure faster adaptation in the face of market shifts. Originality/value This study explains the conflicting evidences on the relation between cultural tightness and/or looseness and innovation. Our finding explains how cultural looseness is generally associated with innovation in cross-cultural data (Deckert and Shomaker, 2022) as well as data within loose culture (Jackson et al., 2019). Our finding also explains Chua et al.’s (2019) seemingly contrary evidence that across 31 provinces in China, provinces with tight cultures exhibit higher rates of incremental innovation. Also, high cross-domain consistency prevents the emergence of radically innovative domains, which explains why provinces with tight cultures exhibit lower rates of radical innovation in the same paper.