A novel framework for increasing research transparency: Exploring the connection between diversity and innovation

A split sample/dual method research protocol is demonstrated to increase transparency while reducing the probability of false discovery. We apply the protocol to examine whether diversity in ownership teams increases or decreases the likelihood of a firm reporting a novel innovation using data from the 2018 United States Census Bureau’s Annual Business Survey. Transparency is increased in three ways: 1) all specification testing and identifying potentially productive models is done in an exploratory subsample that 2) preserves the validity of hypothesis test statistics from de novo estimation in the holdout confirmatory sample with 3) all findings publicly documented in an earlier registered report and in this journal publication. Bayesian estimation procedures that leverage information from the exploratory stage included in the confirmatory stage estimation replace traditional frequentist null hypothesis significance testing. In addition to increasing statistical power by using information from the full sample, Bayesian methods directly estimate a probability distribution for the magnitude of an effect, allowing much richer inference. Estimated magnitudes of diversity along academic discipline, race, ethnicity, and foreign-born status dimensions are positively associated with innovation. A maximally diverse ownership team on these dimensions would be roughly six times more likely to report new-to-market innovation than a homophilic team.