Size Matters: Towards a Contingency Theory of Diversity Effects on Performance

Abstract

This study examines the diversity-performance link by focusing on two types of diversity—gender and functional—in the context of governing boards of 24 quasi-government agencies in Korea over 16 years (2000-2015). Although public management scholarship contains evidence regarding the importance of diversity in public organizations, there is little consensus on what constitutes diversity and how it affects public sector performance. This study expands the scope of dialogues by highlighting multi-dimensional characteristics of diversity and the contingent nature of diversity effects. Multiplicative interaction models confirm that there are distinctive effects of different types of diversity on performance, and the relationship is moderated by the size of the group to which minorities belong. While the effect of board gender diversity is limited in our data, the effect of having a female chief executive is positively significant with decreasing marginal effect as the number of board members increases. On the other hand, the relationship of functional diversity in the boardroom to agency performance is negative, while the negative marginal effect decreases and becomes positive when board size rises above a critical number.