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Ethnic Diversity and Team Performance: A Field Experiment

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  • Hoogendoorn, Sander M.

    () (University of Amsterdam)

  • van Praag, Mirjam C.

    () (Copenhagen Business School)

Abstract

One of the most salient and relevant dimensions of team heterogeneity is ethnicity. We measure the causal impact of ethnic diversity on the performance of business teams using a randomized field experiment. We follow 550 students who set up 45 real companies as part of their curriculum in an international business program in the Netherlands. We exploit the fact that companies are set up in realistic though similar circumstances and that we, as outside researchers, had the unique opportunity to exogenously vary the ethnic composition of otherwise randomly composed teams. The student population consists of 55% students with a non-Dutch ethnicity from 53 different countries of origin. We find that a moderate level of ethnic diversity has no effect on team performance in terms of business outcomes (sales, profits and profits per share). However, if at least the majority of team members is ethnically diverse, then more ethnic diversity has a positive impact on the performance of teams. In line with theoretical predictions, our data suggest that this positive effect could be related to the more diverse pool of relevant knowledge facilitating (mutual) learning within ethnically diverse teams.

Suggested Citation

  • Hoogendoorn, Sander M. & van Praag, Mirjam C., 2012. "Ethnic Diversity and Team Performance: A Field Experiment," IZA Discussion Papers 6731, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6731
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    Cited by:

    1. Alberto Alesina & Johann Harnoss & Hillel Rapoport, 2016. "Birthplace diversity and economic prosperity," Journal of Economic Growth, Springer, vol. 21(2), pages 101-138, June.
    2. Hoogendoorn, Sander M. & Parker, Simon C. & van Praag, Mirjam C., 2012. "Ability Dispersion and Team Performance: A Field Experiment," IZA Discussion Papers 7044, Institute for the Study of Labor (IZA).
    3. Nathan, Max, 2013. "The Wider Economic Impacts of High-Skilled Migrants: A Survey of the Literature," IZA Discussion Papers 7653, Institute for the Study of Labor (IZA).
    4. Bernd Frick & Anica Rose, 2017. "Over the top: Team composition and performance in Himalayan expeditions," Working Papers Dissertations 24, Paderborn University, Faculty of Business Administration and Economics.
    5. Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2015. "Cultural diversity and plant-level productivity," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 85-96.
    6. Longhi, Simonetta, 2013. "Impact of cultural diversity on wages, evidence from panel data," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 797-807.
    7. Marianne Bertrand & Esther Duflo, 2016. "Field Experiments on Discrimination," NBER Working Papers 22014, National Bureau of Economic Research, Inc.
    8. Paul A. Gompers & Kevin Huang & Sophie Q. Wang, 2017. "Homophily in Entrepreneurial Team Formation," NBER Working Papers 23459, National Bureau of Economic Research, Inc.
    9. Sander Hoogendoorn & Simon C. Parker & Mirjam van Praag, 2014. "Ability Dispersion and Team Performance," Tinbergen Institute Discussion Papers 14-053/VII, Tinbergen Institute.
    10. Bonin, Holger, 2017. "The Potential Economic Benefits of Education of Migrants in the EU," IZA Research Reports 75, Institute for the Study of Labor (IZA).
    11. repec:eee:chieco:v:46:y:2017:i:c:p:1-9 is not listed on IDEAS
    12. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series 2013012, Norface Research Programme on Migration, Department of Economics, University College London.

    More about this item

    Keywords

    (mutual) learning; entrepreneurship; field experiment; team performance; ethnic diversity;

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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