Duality in Diversity: Cultural Heterogeneity, Language, and Firm Performance

Duality in Diversity: Cultural Heterogeneity, Language, and Firm Performance

By Matthew Corritore, Amir Goldberg, Sameer B. Srivastava
March 2018Working Paper No. 3561

How does cultural heterogeneity in an organization relate to its underlying capacity for execution and innovation? Existing literature often understands cultural diversity as presenting a trade-off between task coordination and creative problem-solving. This work assumes that diversity arises primarily through cultural differences between individuals. In contrast, we propose that diversity can also exist within persons such that cultural heterogeneity can be unpacked into two distinct forms: interpersonal and intrapersonal. We argue that the former tends to undermine coordination and portends worsening firm profitability, while the latter facilitates creativity and supports greater patenting success and more positive market valuations. To evaluate these propositions, we use unsupervised learning to identify cultural content in employee reviews of nearly 500 publicly traded firms on a leading company review website and then develop novel, time-varying measures of cultural heterogeneity. Our empirical results lend support for our two core propositions, demonstrating that a diversity of cultural beliefs in an organization does not necessarily impose a trade-off between operational efficiency and creativity.