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Diversity and organizational innovation:

The role of employee involvementYANG YANG 1 * AND ALISON M. KONRAD 21 Management Department, the Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, U.S.A.2 Department of Organizational Behavior, Richard Ivey School of Business, U. of Western Ontario, London, Ontario,Canada

Summary This study examined the interactive effects of workplace diversity and employee involvement on organ-izational innovation. Using a sample of 182 large Canadian organizations, we found a three-way interactionbetween level of employee involvement, variation in involvement, and racioethnic diversity on innovation. In

organizations with high levels of employee involvement, high variation in involvement was associated withhigher involvement levels among racioethnic minorities, resulting in a stronger association between diversityand innovation. Furthermore, the association between White employee involvement and innovation wassignicantly more positive under the condition of high involvement among racioethnic minority groupmembers. Thus, ensuring high levels of involvement among members of historically marginalized racioethnicgroups enhances the innovation effects of employee empowerment systems. Copyright # 2010 John Wiley &Sons, Ltd.

Keywords: gender and racioethnic diversity, diversity management, employee involvement level, employeeinvolvement variation, organizational innovation

Introduction

The two research streams of employee involvement and diversity management have a number of heretoforeunacknowledged commonalities. Both areas seek to improve the impact of human capital on business outcomes bydeveloping and utilizing employee skills and abilities more fully. Employee involvement practices are intended toinject the information and knowledge of non-management employees into higher-level organizational decision-making processes (Benson, Young, & Lawler, 2006; Guthrie, 2001; Lawler, 1986). Diversity management seeks toleverage the different information and knowledge bases brought into the organization by members of historicallymarginalized demographic and identity groups (Cox, 2001; Cox & Blake, 1991; Robinson & Dechant, 1997). Thegoal of both research streams can be viewed as twofold: Enhancing workplace outcomes for historicallydisempowered employees, while at the same time creating value for the organization.

Employee involvement and diversity management differ in important respects. Employee involvement researchhas failed to recognize the impact of demographic and identity group memberships on employee outcomes, whilediversity management research emphasizes that certain categories of individuals are less likely to be developed andutilized than others. The area of diversity management has failed to develop a coherent set of recommendedmanagement practices (Kalev, Dobbin, & Kelly, 2006), and indeed, some of the practices, such as afrmative action,have been controversial (Heilman, Block, & Stathatos, 1997). By comparison, a well-developed set of employeeinvolvement practices has been proposed and studied (Benson et al., 2006; Delery & Shaw, 2001; Pfeffer, 1998).

Journal of Organizational Behavior, J. Organiz. Behav. 32, 10621083 (2011)Published online 7 September 2010 in Wiley Online Library (wileyonlinelibrary.com) DOI : 10.1002/job.724

* Correspondence to: Yang Yang, The Management Department of the Wharton School, University of Pennsylvania, 2000Steinberg-DietrichHall,Philadelphia, Pennsylvania, 19104, USA. E-mail: [email protected]

Copyright # 2010 John Wiley & Sons, Ltd. Received 18 December 2008

Revised 20 July 2010, Accepted 21 July 2010


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Specically, employee involvement practices for enhancing employee knowledge, skills, and abilities (KSAs), forempowering employees to make decisions and for motivating employees to perform have been linked to positiveorganizational outcomes (Combs, Liu, Hall, & Ketchen, 2006; Yalabik, Chen, Lawler, & Kim, 2008).

Synthesizing these two streams of thought has the potential to contribute to extant knowledge in both areas. On theone hand, the diversity management perspective helps to predict possible implementation difculties when

employee involvement programs do not take into account cultural and power differences between identity groups.Social closure theory argues that traditionally predominant groups are likely to exclude historically marginalizedgroups from accessing important resources in order to maintain their power (Tomaskovic-Devey, 1993). Employeeinvolvement programs, which aim at pushing power, information, and knowledge down to the lower job levels(Lawler, 1986), may be viewed as constituting important resources. Thus powerful demographic groups may excludeless powerful groups from participating in involvement processes. Instead, in an environment high in autonomy andwithout strong diversity management, demographic groups might end up in stereotypical roles (Harrison &Humphrey, 2010), limiting participative opportunities for marginalized groups. As a result, involvement practicesmay not lead to desired outcomes in diverse workplaces.

On the other hand, the employee involvement perspective has the potential to provide the diversity managementeld with a coherent set of organizational practices for fostering intergroup contact and improving intergrouprelations. Specically, Allports contact hypothesis (1954) argues that four features of a contact situation can

effectively reduce intergroup prejudice, namely, equal status between the groups in the contact situation; commongoals; intergroup cooperation; and institutional support (e.g., authorities, laws, or custom). A recent meta-analysis of research in this eld suggests that these conditions are not essential and mere contact can reduce intergroup prejudice(Pettigrew & Tropp, 2006). Employee involvement programs, which emphasize communication and teamwork, mayprovide opportunities for intergroup contact and lead to favorable outcomes in a diverse workplace. In sum,combining the two perspectives identies involvement programs as potential tools for developing and leveraginghistorically underutilized human capital in order to realize the potential of a diverse workforce. Care must be taken inthe implementation of involvement programs in order to ensure that all demographic groups have equalparticipation. Otherwise, involvement programs will be unable to address intergroup power differences as is neededfor effective diversity management.

This study examines the combined impact of racioethnic diversity, proportion of women, and employeeinvolvement on organizational innovation. Innovation is an often-invoked benet of employing more members of historically marginalized groups (Cox & Blake, 1991; Robinson & Dechant, 1997) which has not yet received muchresearch attention. Both conceptual and empirical support exists to justify the link between organizationaldemographic composition and innovation. Conceptual perspectives on creativity emphasize the value of a diversityof perspectives and knowledge bases for generating a wider variety of ideas (Cummings, 2004; Rodan, 2002).Empirically, meta-analysis at the group level has found that gender composition and diversity in attitude, ability, andpersonality are positively associated with group performance on complex tasks but negatively associated withperformance on simple tasks (Bowers, Pharmer, & Salas, 2000). This nding implies that the variety of perspectivespresent in a diverse group is benecial when complex problem-solving requiring creativity is needed. At theestablishment level, research has also shown that that greater racioethnic diversity (Richard, 2000) and greaterparticipation of women (Francoeur, Labelle, & Sinclair-Desgagne, 2007) lead to better outcomes when innovationand complex problem-solving are required.

Previous research has assumed that the favorable outcomes result from the increased presence of historicallymarginalized groups and are driven by the participation of employees with new perspectives in organizationaldecision-making, which enhances the variety of viewpoints considered (Harrison & Klein, 2007). Increasing theemployment of historically marginalized groups does not automatically increase their opportunities for voice,however. Historically predominant groups often maintain or even gain more power when the proportion of marginalized group members increases (Maume, 1999). Hence, a key research question is whether members of historically predominant and marginalized groups have an equal voice in the workplace. We address this question byassessing whether members of historically predominant and marginalized groups participate equally in employee

Copyright # 2010 John Wiley & Sons, Ltd. J. Organiz. Behav. 32 , 10621083 (2011)DOI: 10.1002/job

DIVERSITY, EMPOWERMENT AND ORGANIZATIONAL INNOVATION 1063


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empowerment programs. Hence, beyond examining the interactive effect of employee involvement with racioethnicdiversity and proportion of women on organizational innovation, the current study also examines the level of involvement reported by members of historically predominant and marginalized groups as well as the outcome whenall groups report a high level of participation.

As an outcome variable, innovation is a relatively proximal outcome of effectively-managed workplaces

compared to rm nancial performance or other measures of overall organizational effectiveness. Innovation doesnot necessarily result in improved performance, for instance, if an industry downturn occurs or management sets thewrong strategic direction. Employee involvement programs are intended to generate new ideas to improveorganizational products and processes (Arthur & Aiman-Smith, 2001; Benson et al., 2006; Combs et al., 2006;Guthrie, 2001), which may eventually have positive impacts on rm nancial performance depending upon strategy,industry environment, and other exogenous factors. Hence, at the establishment level, innovation is likely to be amore proximal outcome than performance for studying the joint effects of demographic composition and employeeinvolvement.

Theoretical Overview

Theoretically, we posit that beyond any potential main effects, employee involvement practices are a potentialmoderator of the relationship between the employment of historically marginalized groups and organizationalinnovation. As such, our arguments are consistent with previous authors conclusions that the impact of workplacediversity is moderated by contextual factors (Joshi & Roh, 2009; Kochan et al., 2003; van Knippenberg & Schippers,2007).

In the following sections, we link demographic composition and employee empowerment to two key creativeprocesses in organizations, specically, the generative process and the elaboration process. Then, we use thecategorizationelaboration model of diversity dynamics (van Knippenberg, De Dreu, & Homan, 2004) to provide atheoretical foundation for examining employee involvement programs as a potential moderator of the link betweendemographic composition andorganizational innovation. While the theoretical basis of our arguments was originallyconceptualized at the group level of analysis, we apply them to innovation at the organizational level. Cross-levelmodels of organization learning and innovation are widely accepted which identify group-level effects as crucialfactors for creating organizational-level outcomes (Crossan, Lane, & White, 1999). Furthermore, prior research ondiversity management has shown that the same mechanism (in that case, diversity climate) had positive effects atboth the individual and organizational levels (Gonzalez & DeNisi, 2009).

Demographic composition and the generative process

Organizational innovation requires the generation of novel ideas that address the current organizational situation.Novel ideas result from the process of merging thought categories, or mental images, either across or withindomains, in ways that have not been done before, in order to develop an original and appropriate solution to asituation or problem (Kilgour, 2006, p. 82). Hence, one foundation of creativity is the generative process(Leung, Maddux, Galinsky, & Chiu, 2008) that results in a wider set of options for consideration. As such, access tonew sources of information, knowledge, and perspectives enhances the potential for organizational innovation byincreasing the number of thought categories and mental images available for modication and recombination. At theorganizational level, research has shown that organizations with access to a wider variety of knowledge resources aremore effective innovators (Rodan & Galunic, 2004) and are better able to develop and assimilate new processes intotheir ongoing operations (Fichman & Kemerer, 1997).Although some researchers have discounted the possibility


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historically marginalized groups will generate a variety of ideas and engage in the elaboration process to select,develop, and implement those ideas.

The categorizationelaboration model of diversity

Diverse groups engaged in organizational decision-making and problem-solving have the potential for greatercreativity than homogeneous groups, due to the richness of the resources at their disposal during the generative phaseof the creativity process. As a result, demographic composition is linked to the potential for organizationalinnovation. Diversity has also been linked to destructive conict and miscommunication (Jehn, Northcraft, & Neale,1999; Pelled, Eisenhardt, & Xin, 1999), however, which hamper collaboration during the elaboration phase of the creativity process (De Dreu & Weingart, 2003; Edmondson, 1999). The potentially negative outcomesof diversity are attributable to what van Knippenberg et al. (2004) call social categorization effects, dened as,the differentiation between in-group others, who are subjectively similar to self, and outgroup others, who aresubjectively dissimilar to self (van Knippenberg et al., 2004, p. 1010). Social categorization results in negativeoutcomes for diverse groups due to the operation of intergroup biases (Brewer & Brown, 1998). Intergroup biasesdisrupt working relationships by reducing listening, information exchange, and trust (Brewer, 1979; Jehn et al.,1999; van Knippenberg, 1999; van Knippenberg & Wilke, 1992).

van Knippenberg et al. (2004) explain the relationship between diversity, social categorization, and thedevelopment and generation of new ideas with their categorizationelaboration model (CEM). The CEM proposesthat the impact of diversity on group outcomes such as creativity, innovation, and decision quality depends upon theextent to which categorization processes result in intergroup biases. While diverse groups contain a larger variety of information, knowledge, and perspectives, the ability of the group to draw upon these greater resources is inhibited if social categorization processes become triggered by cognitive accessibility of categorization, normative t of categorization, and/or identity threat (van Knippenberg et al., 2004, Figure 1). In organizations, the CEM impliesthat increasing the participation of historically marginalized groups will only lead to positive innovation outcomeswhen organizations minimize the impact of intergroup biases through effective management.

Employee involvement practices may help organizations avoid or overcome intergroup biases as employeedemographic composition changes. Practices that build employee KSAs strengthen the condence of all groups that

they can contribute positively to the organization, which reduces problems of low collective self-esteem and identitythreat (Crocker & Luhtanen, 1990; Crocker, Luhtanen, Broadnax, & Blaine, 1999). Practices that involve employeesin teamwork and decision-making create more opportunities for intergroup contact across the organization. Contactis an essential condition that reduces intergroup prejudice and enhances the likelihood of building positive workingrelationships across demographic and identity group differences (Pettigrew, 1998). Practices that motivateemployees help to engage members of historically marginalized group by creating a more positive organizationalcontext for these individuals (Cox, 2001). Because employee empowerment programs reduce identity threat,enhance inter-group contact, and motivate members of all identity groups, they have the potential to minimizecategorization processes and maximize the generative and elaboration processes in workplaces undergoingdemographic changes. Hence, employee empowerment programs may be quite effective for maximizingorganizational innovation as the presence of historically marginalized groups increases.

Research Hypotheses

Research suggests that the mere institution of employee involvement practices by management is insufcient forgenerating the desired outcomes of increased motivation, innovation, and performance (Riordan et al., 2005; Shadur,Kienzle, & Rodwell, 1999). Rather, the effectiveness of involvement practices depends on the breadth of the program




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and the extent to which employees across the entire organization actually engage in participative behaviors(Ichniowski, Kochan, Levine, Olson, & Strauss, 1996; Lepak, Taylor, Tekleab, Marrone, & Cohen, 2007; Nishii,Lepak, & Schneider, 2008; Takeuchi, Chen, & Lepak, 2009; Vandenberg et al., 1999). In particular, the percentage of workers in a rm engaged in participatory behaviors has been linked to positive outcomes in several studies (Bensonet al., 2006; Datta, Guthrie, & Wright, 2005; Guest, Conway, & Dewe, 2004; Guest, Michie, Conway, & Sheehan,

2003; Guthrie, 2001). These ndings support Lawlers (1986) conclusion that employee involvement programs thatextend across the organization are more effective than more limited programs. A high involvement culture is onlyindicated when involvement behaviors are manifested by employees across the organization (DenHartog & Verburg,2004; Guest et al., 2003).

We posit that the level of actual employee involvement and the amount of variation in involvement betweentraditionally predominant and historically marginalized groups are potentially important moderators of theassociation between organizational demographic composition and innovation outcomes. A high levelof involvementis needed for employees to generate and elaborate a variety of innovative ideas. Variation in involvement, or unequalinvolvement between traditionally predominant and historically marginalized groups, reduces the positive impact of a highly-involved workforce.

Two-way interaction: Demographic composition and employee involvement

Employee involvement practices, which engage employees in relatively high-level organizational decision-makingprocesses (Benson et al., 2006; Delery & Shaw, 2001; Pfeffer, 1998), have the potential to leverage the innovationpotential of a workforce composed of a higher percentage of women and greater racioethnic diversity. Employeeinvolvement practices that enhance employee KSAs, empower employees to make decisions, and motivateemployees to perform are likely to enhance innovation outcomes.

Involvement practices that enhance employee KSAs, such as training and job rotation, increase the quality of the organizations human capital (Pfeffer, 1998). Members of historically marginalized groups are particularlylikely to benet from practices that build their KSAs because they are most likely to have experienced barriersto their personal development. For instance, women have had relatively little access to training in a number of blue-collar occupations(Fransson & Tho rnqvist, 2006; Harlan& Steinberg, 1989) and people of color tend to have less accessto high quality education (Darling-Hammond, 2006). Access to training, therefore, is likely to enhance the abilities of adiverse workforce to contribute value-added ideas to the organizational decision-making process. Buildingemployee KSAs is necessary because openness to employee input without building employee KSAs to the levelwhere they can contribute high quality ideas is unlikely to result in valuable innovations (Lawler, 1986).

Involvement practices that increase employee participation in important decision-making processes includesuggestion programs, information-sharing, job design, and self-managed teams (Delery & Shaw, 2001; Pfeffer,1998). Members of historically marginalized groups may particularly benet from such involvement practicesbecause they are most likely to be segregated into low-level routine jobs that provide little discretion or autonomy.Women and racial minorities are signicantly more likely to be found at the bottom of wage distributions (Pendakur,Pendakur, & Woodcock, 2008) and signicantly less likely than white men to be promoted from the lowest-levelorganizational positions, a phenomenon called, the sticky oor (Yap & Konrad, 2009). Hence, accessing the ideasof historically marginalized groups requires the organization to push decision-making opportunities downward toempower employees at the bottom of the wage distribution. Moreover, according to intergroup contact theory,involvement practices may increase opportunities for intergroup contact and in turn reduce intergroup prejudice(Pettigrew, 1998; Pettigrew & Tropp, 2006). Under this condition, the generative and elaboration processes proposedby CEM are more likely to be facilitated.

Involvement practices must also motivate employees to contribute ideas in a way that adds value to theorganization. Engaging in participative behaviors relatively frequently enhances employee motivation through thefulllment of individual needs (Deci & Ryan, 2000). Teamwork meets the need for afliation; involvement in work




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design meets needs for exibility and self-development; and involvement in communication meets the need for intrinsic job qualities such as opportunities to have voice and inuence (Benson et al., 2006; Vandenberg et al., 1999). Teamwork provides people with opportunities to work together closely, enhances chances of face-to-face interaction, increasingcommunication and social integration (Evans & Davis, 2005). In these ways, teamwork fullls social needs andincreases information-sharing across the organization. In sum, employee involvement activities are likely to be highly

motivating in ways that enhance the generation and elaboration of a large variety of new ideas.In summary, employee involvement practices have the potential to improve the KSAs, participation in decision-

making, motivation, and quality of working life for workers at the bottom of the organizational hierarchy. Becausemembers of historically marginalized groups are over-represented in these low-level positions, employeeinvolvement practices have the potential to help organizations better utilize the variety of information, knowledge,and perspectives of these groups. Organizations that create a relatively high level of actual employee participation ininvolvement behaviors access the variety of ideas present across the organization more effectively, resulting in ahigher level of innovation.

Hypothesis 1 : Employee participation in involvement behaviors positively moderates the association between therepresentation of women and racioethnic minorities and organizational innovation.

Three-way interaction: Variation in employee involvement

Employee involvement practices are likely to reduce barriers to the novel contributions of members of historicallymarginalized groups; however, as previous research has shown, management implementation of practices is ofteninconsistent (Lawler, 1986; Riordan et al., 2005; Shadur et al., 1999). Furthermore, a high level of involvement doesnot necessarily imply that traditionally predominant and historically marginalized groups participate equally ininvolvement processes. Tomaskovic-Deveys (1993) social closure theorysuggests that powerful social groups hoardresources within the in-groups social network to maintain their higher status and material outcomes. His researchhas documented social closure effects among white employees and among men, who fail to share resources such as job opportunities, authority, and training with people of color and women, respectively (Tomaskovic-Devey &Skaggs, 2002; Tomaskovic-Devey, Thomas, & Johnson, 2005). In the terminology of social closure theory,employee involvement opportunities constitute a valuable organizational resource that provide visibility, impact, andthe psychological benets of empowerment (Spreitzer, 1995, 1996). As such, the identity groups who have the abilityto claim involvement opportunities for themselves will do so, and will tend to deny them to out-group members to theextent they can.

The involvement of historically marginalized groups has important implications for organizational innovation.Successful innovation requires the development and implementation of ideas that are novel for the organization(Kilgour, 2006). Novel ideas are most likely to come from individuals whose beliefs, assumptions, and perspectivesdiffer from the organizations historical norm. The quest for novelty, therefore, implies that organizationalinnovation can be increased by heeding the voices of members of historically marginalized groups (Cox, 2001).Therefore, given the foundation of a relatively high level of employee involvement, the low variation in involvementderived from the active participation of members of historically marginalized groups will have the potential toenhance organizational innovation even further.

Achieving the goal of a relatively high level of voice for members of historically marginalized groups is not easy.In addition to social closure theory, the CEM (van Knippenberg et al., 2004) and status characteristics theory(Ridgeway, 1991) emphasize that there are many barriers to overcome. The CEM (van Knippenberg et al., 2004)supports the value of focusing on new ideas through the elaboration process and cautions that many organizationscomposed of multiple demographic groups will fail to garner these potential benets due to the operation of intergroup biases. Status characteristics theory (Ridgeway, 1991) emphasizes that members of historicallymarginalized groups are the individuals least likely to be heard and supported in task groups due to negative




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expectations for their ability to add value. Together, these perspectives highlight that members of historicallymarginalized groups experience barriers when they attempt to contribute new ideas to support organizationalinnovation. Hence, it is likely that many organizations with employee involvement programs do not always fullyleverage the potential benets to innovation.

We anticipate that those organizations that successfully promote the voices of historically marginalized groups

will show the highest levels of innovation. This set of contingencies means that the most organizational innovationwill be associated with a combination of a relatively high level and low variation in employee involvement. A highlevelof involvement indicates that the organization is attempting to leverage employee ideas, and the low variation ininvolvement indicates that members of historically marginalized groups and traditionally predominant groupsexercise an equal level of voice.

Hypothesis 2 : The positive moderating effect of employee involvement level on the association between therepresentation of women and racioethnic minorities and organizational innovation will be stronger when variationin involvement behaviors is low.

Dominant and marginalized group involvement

Employee involvement for both traditionally dominant groups and historically marginalized groups will beimportant to organizational innovation. As argued above, historically marginalized groups need to be involvedbecause they are most likely to bring perspectives, knowledge, and ideas that are new to the organization. Hence,high involvement of traditionally dominant groups without involving members of historically marginalized groupswill lead to less innovation due to reduced creativity for idea generation.

High involvement of historically marginalized groups without involving members of traditionally dominantgroups is also likely to limit organizational innovation. First, members of traditionally dominant groups are likely tohave the longest tenures and deepest levels of organization-specic knowledge. Hence, their inclusion in the processof elaborating new ideas (van Knippenberg et al., 2004) is likely to maximize t to the organizational situation andbenets to performance outcomes.

Second, due to status distinctions (Ridgeway, 1991) and social closure dynamics (Tomaskovic-Devey, 1993),

innovations developed either wholly or primarily by members of historically marginalized groups are likely tobecome derailed at the implementation phase. Traditionally dominant groups generally hold critical positions inorganizations and are capable of disrupting the implementation of changes they do not support (Fronda & Moriceau,2008; Harrison & Humphrey, 2010). Participation in the development of the innovation reduces resistance to changeby enhancing awareness of the need for the change, increasing understanding of the nature of the change, andallowing input into the design of the change so that it will lead to desirable outcomes for the implementers (Lawler,1986). Hence, the inclusion of members of traditionally dominant groups in involvement programs is critical toinnovation due to the importance of gaining their support during the implementation phase of the innovation process.

Hypothesis 3 : Involvement behaviors by historically marginalized groups moderate the association betweeninvolvement behaviors by traditionally dominant groups and innovation such that the slope becomes signicantlymore positive (i.e. upward-slanting) as involvement by historically marginalized groups increases.

Research Methodology

We used the Workplace and Employee Survey (WES) data collected by Statistics Canada in 2001 and 2002 to test theabove hypotheses. Based on industry, region, and size, Statistics Canada uses a stratied sampling method to draw




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the workplace sample from the Business Registration List containing all businesses operated in Canada. All surveyedcompanies were given a sampling weight to facilitate estimation of population characteristics. The sampling weightsreect the probability that any particular data point was included in the WES sample. For instance, 568 retailworkplaces and 265 forestry, mining, oil, and gas extraction workplaces were included in the 2001WES workplacesample; however, the 568 retail workplaces represent a total of 229 893 retailers in Canada, while the 265 forestry,

mining, oil, and gas extraction workplaces represent a total of only 10 362 Canadian workplaces. Researchers arerequired by Statistics Canada to weight the WES data in analysis to reect the differences in the probability that eachtype of workplace was selected into the sample. The reason for this requirement is to ensure that the disseminatedndings accurately reect the population of Canadian workplaces.

The major respondent to the workplace survey was an HR manager, while in small companies, the majorrespondents were the general managers or the business owners (Zatzick & Iverson, 2006). Statistics Canada usedcomputer assisted telephone interviews to collect workplace data. For large organizations, Statistics Canada requiredmore than one contact person to respond to the workplace survey. For example, accounting personnel were asked toprovide nancial information (Zatzick & Iverson, 2006). The employee sample was drawn based on the listsprovided by each responding employer. Twenty-four employees were randomly selected from each company, and allemployees were surveyed if the companies had less than four employees. Both the employers and employees whohad responded to the 2001 surveys were also surveyed in 2002, allowing for the creation of a longitudinal database.

In this study, we measured organizational innovation using the 2002 workplace survey and assessed diversity andinvolvement using aggregations from the 2001 employee survey. Drawing information from different surveys forthe dependent and independent variables reduces common method bias. Also, creating a one-year lag between theindependent and the dependent variables facilitates testing causal relationships. For the workplace survey, responserates were 85.9 and 84 per cent in 2001 and 2002, respectively. For the employee survey, response rates were 86.9and 90.9 per cent in 2001 and 2002, respectively. The datasets consisted of 6223 employers and 20 377 employees in2001, and 5818 employers and 16 813 employees in 2002.

We only retained organizations that responded to both 2001 and 2002 workplace surveys so that we could test theone-year lagged effects of the hypothesized predictors on innovation. We focused on organizations with more than500 employees because size can inuence organizational innovation (Damanpour, 1996). Among these largeorganizations, we selected those organizations with at least ve respondents to the employee surveys becauseaggregation biases diminish when ve or more data points are used to assess the characteristics of collectivities(Bliese & Halverson, 1998; Liao, Joshi, & Chuang, 2004). We also left supervisors out of this calculation becauseinvolvement opportunities are likely to be different for supervisors and non-supervisors. The nal sample used totest the hypotheses consisted of 183 organizations and 1289 employees. The average number of employees in thesampled establishments was 1108. Means, standard deviations, and correlations for major study variables are shownin Table 1.

Table 1. Means, standard deviations, and correlations

Mean SD 1 2 3 4 5 6 7 8 9 10

1. Innovation strategy 3.02 0.95 1.002. People strategy 3.29 0.74 0.38 1.003. Unionization 0.88 0.32 0.09 0.02 1.00

4. % Professionals 0.30 0.22 0.01 0.18 0.23 1.005. Racioethnic diversity (Blau index) 0.18 0.20 0.28 0.06 0.33 0.16 1.006. % Women 0.58 0.26 0.02 0.02 0.16 0.56 0.06 1.007. Squared % women 0.40 0.26 0.02 0.04 0.17 0.53 0.04 0.97 1.008. Involvement level 0.34 0.40 0.17 0.24 0.16 0.04 0.18 0.02 0.01 1.009. Involvement variation 0.80 0.22 0.00 0.08 0.03 0.09 0.14 0.05 0.08 0.32 1.0010. Organization innovation 0.48 0 .35 0.29 0.21 0.03 0.14 0.02 0.09 0.07 0 .14 0 .00 1 .00

Note . N 182. Correlations > 0.16 (0.21) in magnitude are signicant at the 0.05 (0.01) level (2-tailed).




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Measures

Demographic compositionBecause the workplace survey did not provide information concerning overall gender and racioethnic composition,aggregation of individual demographic characteristics was used to measure organizational-level gender and

racioethnic diversity. The 2001 employee survey data provided information on gender and race, and organizational-level demographic composition was then assessed by aggregating individual employee responses. Harrison andKlein (2007) recommend the use of Blaus (1977) index to measure demographic composition when conceptualarguments focus on the variety of knowledge, information, and ideas present in an organization. Following theirrecommendation, we calculated the Blau index for the racial composition of each workplace based on the categoriesof White, Black, or African origin, Bi-Racial or Multiple Minority backgrounds, and Asian/Filipino/Middle Easternorigin or other.

Blaus (1977) index is problematic for dimensions such as gender which have only two categories because itsrange is truncated such that the maximum value is only 0.5 rather than the theoretical 1.0 (Harrison & Sin, 2006). Forthis reason, a proportional measure generally has more statistical power (Williams & Mea n, 2004). We followedprior authors (e.g., Frink et al., 2003) and used the percentage of women as the measure of gender composition,adding a squared term to capture any nonlinear effects resulting from the impact of variety.

To check the validity of aggregating the demographic data reported by employees to the establishment level, wecompared the WES establishment-level data to 2001 Census statistics provided by Statistics Canada (2009).Statistics Canada does not provide industry comparisons on the basis of race, ethnicity, or immigration status;however, it does provide industry comparisons by gender. We compared the average percentage of women calculatedfor establishments based on the WES employee data to the percentage of women employed in each of the 14 industrycategories based on the Census data. The correlation between the two percentages was 0.99 ( p < 0.001), theSpearman r was 0.98 ( p < 0.001), and the Kendall t was 0.93 ( p < 0.001). These comparisons showed that ourmeasure of the percentage of women in the establishment was very consistent with the Census data percentage of women in the same industry and supported the validity of using the employee data to measure establishment-leveldemographic diversity.

Table 1 shows that the average percentage of women in the sampled establishments was 59 per cent, while theaverage percentage of people of color was 14 per cent. The average amount of racial diversity as assessed by Blausindex was 0.18.

Employee involvementThe 2001 employee survey included several questions about participation in employee involvement activities. Theitems were not designed to cover the three areas of building skills, motivating, and empowering employees, yettogether, they tap into each of these dimensions. We indicate links to these three conceptual dimensions inparentheses next to each item. The specic questions asked how frequently the individual participated in each of thefollowing activities: Completing employee surveys (motivating, empowering), offering suggestions (empowering,skill building), receiving job rotation or cross-training (skill-building, motivating), being informed about importantissues such as organizational performance (motivating, empowering), participating in task teams or labor-management committees (empowering, motivating, skill-building), problem-solving teams (empowering,motivating, skill-building), and self-directed teams (empowering, motivating, skill-building). The items assessingthe use of teams used four-point scales (1 Never, 2 Occasionally, 3 Frequently, 4 Always), while three-pointscales were applied to other items (1 Never, 2 Occasionally, 3 Frequently). The Cronbachs a of the indexcombining all of these items was 0.94.

To measure organizational-level employee involvement, we rst conducted a factor analysis of these seven itemsat the individual level and calculated each employees factor score in order to deal with the scaling differences on theoriginal survey items. Then, we averaged the factor scores across employees in the same organization to assess thelevel of employee involvement. A higher mean indicated a higher level of employee involvement. Following




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previous studies of organizational climate (e.g., Schneider, Salvaggio, & Subirats, 2002), variation in employeeinvolvement was measured by taking the standard deviation of the employee factor scores. A higher standarddeviation indicated a higher level of variation. The employee involvement measures utilized survey responses of non-supervisory employees only.

We calculated intraclass correlation coefcients (ICCs), ICC(1) and ICC(2), to assess the appropriateness of

aggregating data to assess employee involvement. The ICC(1) of individual involvement was 0.29, which exceededthe conventionally accepted value of 0.05 (Bliese, 2000); and the ICC(2) was 0.67, which exceeded theconventionally accepted value of 0.60 (Ostroff & Schmit, 1993). We also calculated the r wg for this measure. Thedenominator for the r wg statistic is dependent upon the scaling of the item used (Cohen, Doveh, & Eick, 2001);therefore, we calculated a separate r wg for the survey items with three response options (0.83) and the survey itemswith four response options (0.62) (average r wg across all items 0.73). These r wg statistics were adequate in size tosupport the aggregation of the individual employee involvement scores to create an organizational-level measure.

Involvement of historically predominant and marginalized groupsSimilar to the measure of employee involvement, womens and mens involvement was assessed by taking theaverage involvement factor scores of women and men in the same organizations. For involvement of racioethnicgroups, we rst recoded the racioethnic categories into white or historically predominant group and people of color

or historically marginalized groups. We then calculated the average involvement factor scores for each of these twogroups to assess the involvement of historically predominant and marginalized racial groups, respectively.

Organizational innovationThe organizational innovation measure was taken from managers responses to the workplace survey. The 2002workplace survey asked whether the organization had (1) introduced new products/services, (2) improved products/ services, (3) introduced new processes, and (4) improved processes in the previous year (Yes 1, No 0). Theaverage of these four items was used to assess organizational innovation (a 0.74). Table 1 shows that the averageinnovation score reported for these establishments was 0.48, indicating that the average establishment agreed withalmost two of the four innovation survey items.

ControlsWe controlled for industry, unionization, percentage of professionals, innovation strategy, and people strategy , allmeasures taken from managers responses to the 2001 workplace survey. We coded the 14 industries in the sampleinto 13 dummy variables (i.e., Labor Intensive Tertiary Manufacturing, Primary Product Manufacturing, SecondaryProduct Manufacturing, Capital Intensive Tertiary Manufacturing, Construction, Transportation/Warehousing/ Wholesale Trade, Communication and Other Utilities, Retail Trade & Consumer Services, Finance and Insurance,Real Estate, Rental, Leasing Operations, Business Services, Education, Information and Cultural Services) with theForestry/Mining/Oil and Gas extraction industry serving as the comparison category. This is a common procedurefor studies conducted at the establishment level (e.g., Derfus, Maggitti, Grimm, & Smith, 2008; Kim, Hoskisson, &Wan, 2004; Shane, 2001). To assess unionization , we coded those establishments with at least one non-managerialemployee being covered by a collective agreement as 1, and others as 0. Table 1 shows that 88 per cent of theestablishments in the sample were unionized. We also controlled for the percentage of professionals in anorganization as it may inuence innovation (average for the sample was 31 per cent). Because gender and racecomposition are associated with occupational distributions reecting task differences and opportunities forinnovation (Konrad & Pfeffer, 1991; Tomaskovic-Devey, Zimmer, Stainback, Robinson, Taylor, & McTague, 2006),we controlled for the gender (race) composition of the rm when examining the impact of racial (gender)composition.

Becker and Huselid (2006) recommend controlling for other management factors when studying the impactof human resource management, and previous studies have shown that innovation strategy inuences the effects of diversity on organizational outcomes (Richard, McMillan, Chadwick, & Dwyer, 2003). This measure consisted of




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the average of three items assessing the importance of: Undertaking research and development, developing newproducts or services, and developing new production or operating techniques (1 not important, 5 crucial;a 0.79, average for the sample 3.00). Similarly, people strategy, which reects how important employees are to acompanys business strategy, inuences the effectiveness of employee involvement (Zatzick & Iverson, 2006). It wasmeasured by the average of two items assessing the importance of increasing employee skills and increasing

employee involvement (1 not important, 5 crucial; a 0.86, average for the sample 3.28).

Results

Table 2 shows the results of the regressions examining the relationship between gender and racial diversity andorganizational innovation. In all regressions, the predictors were mean centered to control for multicollinearity whentesting interactions. Moreover, because eld data usually lacks power for detecting interaction effects, we setsignicance levels to p < 0.10 for the interaction terms (Harrison, Price, & Bell, 1998). In both sets of regressions, aninnovation strategy and the percentage of women employed were signicant positive predictors of the amount of

organizational innovation reported by the establishment. None of the other main effects were signicant.

Table 2. Diversity and organizational innovation

DV Organizational innovation

Step Predictor % Women nal b Racioethnic diversity nal b

1 ControlsIndustry: 13 categories controlledInnovation strategy 0.21 0.20

People strategy 0.02 0.00Unionization (1 yes, 0 no) 0.09 0.10% of professionals 0.03 0.03(1) Racioethnic diversity 0.04 0.04(1) % of women 0.40 0.68

(2) Squared % of women 0.02 0.21(3) Involvement level 0.06 0.04(4) Involvement variation 0.03 0.04

2 Two-way interactions(1) (3) 0.02 0.10(2) (3) 0.02(1) (4) 0.09 0.02(2) (4) 0.09(3) (4) 0.05

3 Three-way interaction(1) (3) (4) 0.03 0.16 y

(2) (3) (4) 0.15y

Change in R2 at step 1 0.17 0.26

Change in R2 at step 2 0.01 0.02Change in R2 at step 3 0.01 0.02 y

F 2.14 2.47

Overall adjusted R2 0.15 0.17 N 182 182

y p < 0.10; p < 0.05; p < 0.01; p < 0.001.




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Hypothesis 1 predicted that employee participation in involvement behaviors would positively moderatethe association between the representation of women and racioethnic minorities and organizational innovation. Forthe dimension of gender, this hypothesis was tested by examining the signicance of the two-way multiplicativeinteraction terms, percentage of women involvement level and percentage of women squared involvementlevel (Cohen, Cohen, West, & Aiken, 2003, p. 292295). For the dimension of racioethnicity, it was tested with the

two-way interaction of Blaus index of racioethnic diversity involvement level (Table 2). All of these interactionterms were non-signicant, indicating no support for the hypothesis.

Hypothesis 2 predicted that low variation combined with a high level of employee participation in involvementbehaviors would positively moderate the association between representation of women and racioethnic minoritiesand organizational innovation. For the dimension of gender, this hypothesis was tested by examining the signicanceof the three-way multiplicative interaction terms: percentage of women involvement level involvementvariation andpercentage of women squared involvement level involvement variation (Cohen et al., 2003). Theseterms did not add signicantly to the proportion of variance explained in the prediction equation.

For the dimension of racioethnic diversity, Hypothesis 2 was tested by examining the three-way interactionbetween racioethnic diversity involvement level involvement variation (Table 2). This three-way interactionterm added signicantly to the proportion of variance explained in the dependent variable ( p 0.052), supportingfurther examination of the form of the interaction to determine whether it was consistent with the direction of the

effect predicted in the hypothesis.The form of the interaction is shown in Figure 1a and b. At high levels of employee involvement, the simple slope

of the regression line indicating the association between racioethnic diversity and innovation was substantially largerand more positive under the condition of high variation in involvement (1.66, t 1.84, p 0.068) than under thecondition of low variation in involvement (0.78, t 1.53, ns). This difference in slopes indicates that when level andvariation in employee involvement were both high, the level of racioethnic diversity was positively related toorganizational innovation. When level of involvement was high and variation was low, racioethnic diversity wasunrelated to innovation.

At low levels of employee involvement, the simple slope of the regression line indicating theassociation between racioethnic diversity and innovation was non-signicant for either high or low variationin involvement. This nding was consistent with our reasoning that when the employer is not committed to ahigh level of employee involvement, racioethnic diversity and variation in involvement are unrelated toinnovation.

The form of this interaction did not t our reasoning that a high level of involvement with high variation would notlead to a positive association between diversity and innovation. We made this prediction because we had assumedthat when involvement variation was high, members of historically marginalized groups would be less active ininvolvement behaviors than members of historically predominant groups. This assumption proved to be incorrect.Examining establishments above the sample median on level of participative behaviors, we found that whenracioethnic diversity was present (51 per cent of the sampled establishments were 100 per cent White), members of racioethnic minority groups reported a higher level of participation in involvement behaviors than their Whitecounterparts did. When variation in participation was low, the average participation score for White employees was0.57 compared to 0.74 for racioethnic minorities (no. of establishments 23, t 1.39, ns). When variation inparticipation was high, the average participation score for White employees was 0.74 compared to 1.02 forracioethnic minorities (no. of establishments 35, t 1.38, ns). In other words, in racioethnically diverse highinvolvement workplaces, racioethnic minority groups consistently showed greater involvement than theirWhite counterparts did, although the differences were not statistically signicant. Furthermore, when variationin involvement was high, racioethnic minority employees showed a tendency toward higher average levels of involvement ( t 1.70, p < 0.10) compared to when variation was low. Linking these ndings to the plot of thetriple interaction effect in Figure 1a, the simple slope of the association between diversity and innovation wassignicantly more positive when there was high variation in involvement, which reected higher averageinvolvement of racioethnic minority employees.




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Hypothesis 3 predicted that involvement behaviors by historically marginalized groups would moderate theassociation between involvement behaviors by traditionally dominant groups and innovation such that the slopebecomes signicantly more positive (i.e. upward-slanting) as involvement by historically marginalized groupsincreases. For the gender dimension, this hypothesis was tested with the data from those 155 workplaces employingboth women and men and examining the signicance of the two-way multiplicative interaction term of womensaverage involvement mens average involvement (Table 3). Findings indicated that the interaction betweenwomens and mens level of involvement was not a signicant predictor of organizational innovation.

For the racioethniciy dimension, Hypothesis 3 was tested with the data from those 89 workplaces employing bothWhite and racioethnic minority employees and examining the signicance of the two-way multiplicative interactionterm of White employees involvement ethnic minoritys involvement (Table 3). This interaction term was a

Figure 1. (a) Interaction of racioethnic diversity and involvement variation in establishments with a high level of involvement.(b) Interaction of racioethnic diversity and involvement variation in establishments with a low level of involvement




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Discussion

We brought together the two previously separate streams of research on workplace diversity and employeeinvolvement to examine their joint effects on organizational innovation. The business case for diversity (Cox, 2001;

Cox & Blake, 1991; Robinson & Dechant, 1997) as well as conceptualizations of the creativity process (Kilgour,2006; Leung et al., 2008) argue that diverse organizations will be more innovative, due to the wider variety of information and knowledge resources available for generating new ideas. Also, employee involvement perspectivesargue that involving employees more fully in learning and decision-making processes will result in the developmentof more and better ideas (Appelbaum et al., 2000; Arthur & Aiman-Smith, 2001; Hunter et al., 2002; Kochan &Rubinstein, 2000). Integrating these lines of argument, we predicted that the association between diversity andinnovation would be maximized under the condition of greater employee involvement, and particularly with lowvariation in involvement where historically marginalized and predominant groups participate equally in involvementbehaviors.

Our ndings do not completely support this prediction; however, the pattern of ndings does justify theimportance of garnering employee involvement among members of historically excluded groups for organizationalinnovation. The three-way interaction effect, we observed, shows that when level of employee involvement is high,

racioethnic diversity is positively related to innovation under the condition of high variation in involvement whereminority employees are equally or more active in involvement behaviors than their White counterparts. Racioethnicdiversity is unrelated to innovation when level of employee involvement is low or under the condition of high levelwith low variation in involvement.

One reason why a high level combined with high variation in involvement behaviors strengthened the associationbetween racioethnic diversity and innovation could be because under conditionsof higher variation in involvement, asubset of employees becomes very highly involved in the learning and decision-making processes of theorganization. Under the condition of both high level and high variation, both White and racioethnic minorityemployees show a relatively high average in level of involvement, which indicates the development of a core groupof highly involved employees who pull up the establishments average. The signicant positive link betweendiversity and innovation in this set of establishments may well reect the value of including members of a variety of racioethnic groups among this subset of very highly involved employees.

Consistent with this logic, subsequent analysis supported our prediction that higher levels of involvement by thehistorically marginalized group would strengthen the association between the level of involvement among thetraditionally predominant group and organizational innovation. High involvement by historically marginalizedgroups is most likely to bring new ideas to the organization, while high involvement by traditionally predominantgroups is important to the elaboration process (van Knippenberg et al., 2004) in order to maximize t and benets tothe organization. Traditionally predominant groups also often control organizational systems and positions crucial tothe implementation of new ideas (Harrison & Humphrey, 2010), such that their involvement in innovative processesis essential for overcoming resistance to organizational change.

Theoretical implications

Previous authors have pointed at inconsistency in the implementation of employee involvement across theorganization as a major reason why the results of involvement programs are sometimes less than stellar (Riordanet al., 2005; Shadur et al., 1999). The three-way interaction effect, we observed, adds inclusion of historicallymarginalized racioethnic groups as another factor that can enhance the value of employee involvement. This ndingsuggests that at minimum, empowerment practices that successfully generate a high overall average of involvementacross employees are needed before diversity becomes associated with innovation. Then, supporting a very highlevel of involvement among members of racioethnic minority groups creates innovation by enhancing the impact of the White majoritys involvement behaviors. High involvement by racioethnic minorities creates variation across the




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establishment, however, that variation can be benecial to involvement so long as both the traditionally predominantand the traditionally marginalized groups have access to empowerment processes.

Consistent with the CEM model (van Knippenberg et al., 2004), the jointly positive effect of high involvement of both traditionally predominant and marginalized groups on organizational innovation suggests that creativity can beboosted when the elaboration process is facilitated. The CEM model argues that elaboration will be hindered when

categorization between demographic groups operates. This implies that the mere presence of diversity is not sufcientfor generating and elaborating upon a variety of ideas. Our nding indicates that practices that effectively empowerdifferent demographic groups and integrate their various views can be benecial to organizational innovation.

The relationship between gender composition and innovation was a much more straightforward positive maineffect of the percentage of women. The differences in our ndings for gender and racioethnicity are consistent withthe conclusions of other researchers that gender dynamics are different from the inter-group dynamics betweenracioethnic groups (Goldberg, 2005). As such, our research also supports a recent suggestion that diversity ismeaningful only when it is narrowly dimensionalized (Harrison & Sin, 2006). Combining several types of diversity,such as gender, racioethnicity, tenure, functional specialty, etc., into a single measure of diversity ignores thepossibility that different mechanisms drive inter-group dynamics across different dimensions of diversity.

Managerial implications

Our ndings suggest that beyond ensuring consistent implementation of involvement programs across theorganization (Riordan et al., 2005; Shadur et al., 1999), managers of diverse organizations need to obtain relativelyhigh involvement levels among members of historically marginalized racioethnic groups. Diversity managementpractices might be useful for attaining this goal. Although the eld of diversity has not generated a clear set of effective management practices (Kalev et al., 2006), evidence has emerged supporting the effectiveness of certaindiversity management practices. For instance, the development of afnity groups or employee networks helping tomake connections among racioethnic minorities or women have been linked to positive attitudinal and careeroutcomes for historically marginalized groups (Friedman & Holtom, 2002; Friedman, Kane, & Corneld, 1998).Strengthening the networks of marginalized groups in the organization could enhance information-sharing aboutopportunities to participate effectively in involvement activities.

Evidence also supports the effectiveness of explicit communication regarding the value of diversity to theorganization. Top management support for the value of diversity has been linked to the effectiveness of diversitymanagement in several studies (Camelo-Ordaz, Ferna ndez-Alles, & Mart nez-Fierro, 2006; Combs, 2002; Konrad &Linnehan, 1995; Leonard & Grobler, 2006). Recent evidence suggests that when groups are persuaded of the value of diversity to team performance, diverse teams outperform homogeneous ones (Homan, van Knippenberg, Van Kleef,& De Dreu, 2007). Together these ndings suggest that clear communication from top management articulating thereasons why diversity enhances the organizations ability to fulll its mission helps employees to overcomeintergroup biases and cooperate in involvement activities.

Limitations and directions for future research

One limitation of this study is that we were unable to measure the theoretical mechanisms which, we argued, explainthe joint effects of diversity and employee involvement on organizational innovation. The CEM posits thatcategorization and elaboration processes affect innovation outcomes (van Knippenberg et al., 2004). Employeeinvolvement research suggests that employee empowerment (Spreitzer, 1995, 1996) is a critical process resulting ininnovation. Social closure theory points to network building (Tomaskovic-Devey, 1993) as a key factor driving thedecision-making processes inuencing organizational innovation. None of these processes were measured in theWES data we used to test our hypotheses. The benets of being able to examine the joint effects of diversity andemployee involvement in a large representative sample of establishments made the use of this dataset highlyattractive, however. Future research could make a contribution to knowledge in this area by gathering direct




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measures of categorization and elaboration processes, employee empowerment, and social networks in workplacesand linking these processes to the level of diversity and employee involvement.

Another limitation of this study is the small number of employees responding to the survey measures for each of the participating organizations. The number of employee respondents ranged from 5 to 21, and the average is sixemployees per organization. The aggregated measures based on such a small number of employees may not

accurately reect the organizational-level variables of demographic composition and employee involvement. However,inter-class correlations and r wg statistics supported the aggregation of the employee involvement measures, andcomparisons of demographic composition estimates with industry-level data validated the measure of gendercomposition. It is difcult to get large numbers of survey responses from a representative number of establishments(Becker & Huselid, 2006), so future research might overcome this problem by gathering a larger number of employeeresponses from a more limited set of organizations to complement the strengths and weaknesses of this study.

Finally, the WES data included no information about diversity management practices. Such practices mightinclude the development of employee afnity groups, training leaders to manage diverse teams effectively,examining employment practices to remove barriers to career development for members of historically marginalizedgroups, and clear communication about how diversity helps the organization to perform better. Diversitymanagement practices might be a necessary addition to employee involvement programs in order to ensure thatmembers of historically marginalized groups are fully empowered to participate in involvement activities. Future

research should examine the possible joint effects of employee involvement and diversity management practices forgenerating innovation in diverse organizations.

Acknowledgements

Dr Alison M. Konrad thanks the Corus Entertainment Chair in Women in Management at the Richard Ivey School of Business as well as by Social Sciences and Humanities Research Council of Canada (SSHRCC) Standard ResearchGrant no. 410-2007-1673 for providing support to this project.

YangYanggratefully acknowledges the support of the postdoctoral fellowship award from the Social Sciences andHumanities Council of Canada.

Author biographies

Yang Yang , Ph.D., is a Postdoctoral Fellow at the Management Department of the Wharton School, University of Pennsylvania. Her research interests include workplace inclusivity, diversity initiatives, human resource manage-ment, and organizational justice.Alison M. Konrad , Ph.D., joined the Richard Ivey School of Business, U. of Western Ontario in 2003 as a Professorof Organizational Behavior and holder of the Corus Entertainment Chair in Women in Management. Her researchfocuses on organizational diversity initiatives and making workplaces more inclusive.

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