The right thing to do, and good for growth. A new generation of researchers in the faculty are studying the topic of diversity in business. They are taking on questions like: how can diverse teams best work together? What is the impact of increasing gender balance on a company’s bottom line? And does diversity in the boardroom alter decision-making? These are matters of vital interest in economics and finance, and results increasingly indicate that the best talent and the best ideas come from having a broadly diverse and balanced workplace.

This is the first in a series of Q&As with a selection of researchers who work on the topic at the Faculty of Economics and Business.

Esha Mendiratta is assistant professor in the Department of Global Economics and Management. Her topics include board/top management team composition, gender diversity, and international strategy.

Q. Can you introduce yourself?

A. I joined RUG in August 2016 after finishing my PhD at the University of New South Wales, Sydney. I do research in the area of international business, and comparative corporate governance, and teach subjects like national cultures and corporate governance.

Q. What drew you to the topic of diversity?

A. I am drawn to the subject of diversity for multiple reasons. First, it is an important societal issue that deserves scholarly attention. There is a wealth of evidence that shows that giving equal access to opportunity and resources to all groups is good for communities, businesses and countries. I like the idea of my research contributing to an important subject like this. Second, having lived in multiple countries, I am inherently interested in different types of diversity at the individual, group and country level – of individual experiences over careers; demographic and human capital diversity at the group level (specifically at the highest levels of organisations); and institutional diversity at the country level.

Finally, theoretically, there is an inherent tension in terms of expected results of diversity for teams and organisations. On the one hand, diversity increases variety of opinions, information and resources available, resulting in positive outcomes like better information processing, higher creativity, better performance etc. On the other hand, for decades, research has shown that people identify with similar others and show biases toward outgroups to maintain a positive self-image. I am quite interested in exploring the conditions under which these two mechanisms are likely to kick in because understanding this is critical to building inclusive teams and organisations where diversity is valued and used.

Q. Why is this issue important, and what societal implications does the area have?

A. Teams, businesses and societies are inherently diverse, whether it’s demographic (age, gender, race etc.) or human capital (skills, education backgrounds, functional backgrounds etc.) diversity. Ensuring that all individuals receive equal opportunities, regardless of the group they belong to, is not only the right thing to do, but is also good for economic performance and growth. Utilizing the skills and perspectives of diverse individuals leads to lots of positive outcomes like better problem solving, higher creativity etc. At the same time, firms and societies lose if they don’t create inclusive environments. Let’s take for example gender diversity and leadership. There is enough evidence to show that despite a lot of progress, women still continue to be represented poorly at the top of organisations. Understanding the causes and consequences of this low representation is likely to allow firms and societies to adopt appropriate remedial measures. These are complex issues and I hope that some of my research can be useful in solving some parts of this puzzle.

Q. Can you give an example of an illuminating or exciting discovery you came across in your research?

A. Recently, I have been working with a co-author on studying conditions under which female representation at the highest levels (boards of directors of large American firms in this case) is likely to be associated with high firm performance and higher innovation. We find that when teams align strongly on gender and other attributes (functional background and education field), the positive benefits of gender diversity disappear. That is, when women and men on boards divide into subgroups more strongly based on their functional backgrounds and education fields (e.g. when women on the board also come from different education disciplines and functional backgrounds than men), creating stronger fault lines, the benefits of gender diversity do not seem to be realized. More interestingly, we find that individual intra-personal diversity seems highly relevant – when the range of CEOs’ functional experiences overlap with board members’ range of functional experiences, CEOs are apparently able to manage fault lines created by stronger alignments. This was exciting because we show that just focusing on gender diversity at the top level might be insufficient, and accounting for alignment of traits and experiences is important. Moreover, it is fascinating because we show that it also might be insufficient to only focus on board members’ dominant experiences (e.g. dominant functional background) and consider their entire range of career experiences. We hope we can publish this research soon!

Q. What's next for your research?

I am working on a range of projects at the moment that focus on multiple dimensions of board of directors’ identities and how they potentially interact to influence board/firm level outcomes in different countries. I hope that working on such nuanced explanations allows me to make some meaningful contribution to corporate governance literature on diversity.

For more information about Esha Mendiratta's work, see her research page.