The Effects of Racial Diversity Congruence between Upper Management and Lower Management on Firm Productivity

Abstract

We examine whether matching levels of racial diversity in upper management and lower management (i.e., racial diversity congruence) impact firm productivity. In a sample of high tech firms, we found that congruence between upper management racial diversity and lower management racial diversity positively impacts firm productivity, supporting knowledge-based view perspectives. Furthermore, organizations with high levels of racial diversity in both upper and lower management (i.e., high-high racial diversity congruence) realized superior productivity compared to organizations with low levels of racial diversity in both upper and lower management (i.e., low-low racial diversity congruence). Results also revealed differences across levels of racial diversity incongruence between upper management and lower management (i.e., asymmetry effects) whereby firms with a more racially diverse upper management than lower management out-produced firms with a more racially diverse lower management than upper management. A supplemental sample of Fortune 500 firms enhanced generalizability, as the pattern of findings was very similar to that of the high tech sample. We discuss the study’s implications and make a call for future research that simultaneously considers the upper echelons and the lower echelons.