Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Does Diversity Pay?:
Racial Composition of Firms and the Business Case for Diversity

The "business case for diversity" perspective argues that a diverse workforce, relative to a homogeneous one, produces better business results such as greater corporate profits and earnings. In contrast, skeptics suggest that, in addition to dividing the nation, the emphasis on diversity introduces conflict and other problems that detract from an organization's ability to be effective and profitable. Using data from a national sample of for-profit business organizations (the 1996-1997 National Organizations Survey), this paper tests four hypotheses that are consistent with the business case for diversity thesis. The analysis provides support for all four hypotheses: racial diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits. Although factor analysis suggests that business performance and business volume are distinct, for both of these dimensions, there is a positive relationship between the racial diversity of firms and their business functioning. The implications of these findings are discussed briefly.