How Gender Diversity and Equality in R&D Departments Jointly Affect Firm-Level Innovation Through Innovation Capabilities

Abstract

Innovation research has long shown that firms depend on their R&D personnel to strengthen their innovation capabilities, sparking scholarly interest in how to best staff R&D departments for competitive advantage, with a focus on gender diversity. However, left unexamined are the mechanisms linking gender diversity in R&D departments and firm-level innovation. Further, despite growing interest in the conditions under which diversity may enhance innovation, researchers have not adequately addressed how department-level gender rank inequality—the disproportionate concentration of men and women at various hierarchical ranks—interacts with numerical diversity to affect innovation outcomes. We address both limitations by integrating insights from the information/decision-making perspective on diversity and research on inequality with research on innovation capabilities. Specifically, we develop and test a model explaining how R&D department gender diversity and gender rank equality jointly affect three firm-level innovation capabilities: breadth of external knowledge search, use of external knowledge, and quality of the innovation implementation process. We also examine the indirect effects of gender diversity on firm-level innovation, conditional on gender rank equality, via these capabilities. Our analyses of 552 corporate R&D departments over 12 years show how gender diversity and gender rank equality in R&D departments jointly relate to higher levels of all three firm-level innovation capabilities and, indirectly, to greater firm-level innovation. Our findings suggest that improving a firm’s innovation capabilities and performance requires both increased representation of women in R&D departments and proportional representation of men and women at all ranks of R&D departments.