Gender Diversity and Firm Performance: What Organizational Layer Matter ?

Several theories suggest gender diversity might affect firm performance. Kanter’s (1977) threshold argument maintains that a critical mass of women is a necessary condition in order for women to impact organizational performance in a productive and positive direction. Since the 1990s, this argument has spawned a large stream of empirical research concerning the impact of firm gender diversity on firm outcomes. However, several recent literature reviews highlight mixed results: some studies find a positive impact, others a negative impact and still others no impact at all. We argue that such mixed results are partly due to the organizational layer on which studies focus. Empirical research focuses almost exclusively on boards of directors and ignores other organizational layers, viz., executive committee, middle-management, and staff levels. Building on an original dataset of 159 French firms, we explore the relationship between gender diversity and financial firm performances within each of these four layers separately. Our results indicate that first, the gender diversity at the boards of directors layer exerts no measureable impact on firm outcomes; and, second- conditioning on the existence of a critical “mass of women” threshold -gender diversity in both the middle-management and staff populations layers do exert a measurable and positive effect on firm performance. Barriers to copy such human resource structure provide a sustainable competitive advantage to diversified firms. Finally, our results suggest the relationship between firm gender diversity and firm performance is best described by an inverted U-shaped curve, supporting prior theoretical claims that that diversity contributes to firm performance more than any single sex population.