The Impact of Workforce Diversity on Labour Efficiency, Investment Efficiency and Innovation

ABSTRACT We examine the impact of general workforce and manager gender and ethnic diversity on key drivers of firm value: labour efficiency, investment efficiency and innovation. Firms with greater workforce ethnic diversity experience higher labour productivity and efficiency, while firms with higher workforce gender diversity experience the opposite. Gender diversity at the manager level has no effect on investment efficiency (overinvestment/underinvestment) or innovation, while manager ethnic diversity mitigates underinvestment, accentuates overinvestment, and leads to greater levels of innovation. Our study provides evidence on the impact of workforce and manager diversity on drivers of firm operational performance and value.