The Impact of Gender Diversity on the Performance of Business Teams: Evidence from a Field Experiment

Teams of employees make important decisions in organizations and are central to many business operations. As teams have become a mainstay in business practices, research has increasingly become focused on what elements make a team most successful. One potential determinant of a team’s effectiveness is its gender diversity, as the gender mix of a team may offer an assortment of knowledge and skills. Previous research has shown that mixed gender teams are more generous and egalitarian, and that teams with a larger percentage of women perform better by building meaningful relationships and creating successful work processes. This paper examines the impact of the share of women in business teams on the team’s performance in terms of sales and profits. Additionally, this study examines support for potential underlying mechanisms to explain the effect of gender diversity on team performance.

Findings

Teams with an equal gender mix perform better than male-dominated teams in terms of sales and profits.

  • Teams with lower percentages of women have lower sales and lower profits than teams with a balanced gender mix.
  • The relation between sales and share of women on a team is inverse U-shaped: for teams with between 20% and 50% women, sales increase as the share of women increases; when the share of women exceeds 50%, sales tend to decrease as the share of women increases.
  • Raising the percentage of women in a group from 30% to 40% increased sales by 225 Euros.
  • Profits increase as the share of women increases up to 50%. For higher shares of women, the relation between profits and the share of women is flat.
  • The study suggests that teams with an equal gender mix perform the same as teams with a majority of females, but the distribution of their data does not allow conclusions about the effect of female-dominated teams.
  • The study finds no evidence to support the underlying mechanisms that improve performance on teams with an equal gender mix. The study found that conflicts, friendships, decision-making, atmosphere, learning, and mutual monitoring were all unrelated to the gender composition of the group.

Business teams with an equal gender mix perform better than male-dominated teams in terms of sales and profits.

Methodology

Students from the Department of International Business Studies of the Amsterdam College of Applied Sciences ran businesses in an entrepreneurship education program as part of this study. 550 students were randomly assigned to 45 groups to start a venture. Students sold stock, elected officers and divided tasks, produced and marketed products or services, kept records, and conducted shareholders’ meetings. 19% of the students dropped out during the course of the study. In addition to administrative data and teams’ annual reports, information was collected through three surveys. The baseline survey included demographic questions such as age, ethnicity, education, and parental background, as well as personality questions. All three surveys included self-assessments of the knowledge students have in business management, entrepreneurship, strategy, organization, administration, and leadership.

Published in: Management Sciences
Authors: Sander Hoogendoorn, Hessel Oosterbeek, and Mirjam van Praag
URL: http://dx.doi.org/10.1287/mnsc.1120.1674

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