Is There a Sweet Spot for Gender Diversity Effects on Financial Performance in Organizations? An S‐Curve Model Explanation

ABSTRACT By integrating theories of social identity, critical mass, and status hierarchies, we propose an S‐curve model of the relationship between gender diversity and firm performance. We test our hypotheses using two retail store samples and a third sample of Fortune 500 companies. Across all three samples, we find support for an S‐shaped relationship between gender diversity and firm performance where moderate levels of gender diversity serve as a “sweet spot” for a beneficial effect of gender diversity on firm performance. However, we find that this relationship is moderated by gender equality management such that there are no effects of gender diversity on performance when gender equality is poorly managed. Theoretical and practical implications are discussed.