Furthest Right

Does Diversity Really Make Companies More Innovative?

Those who live in the modern era quickly learn to distrust published science that has a political agenda. We know that objectivity only extends to the limits of reward structures, and that rewards come either from direct payment or making a name for yourself by writing something that many agree with.

As such, it makes sense to be highly critical of studies that are written as headlines like this study purporting to prove that diversity creates innovation:

The study showed that companies that promote a diverse workforce and a culture of inclusion, specifically attracting and retaining minorities, women, the disabled and LGBTQ employees, were more efficient in generating new products and patents.

Zhao found that diverse hiring practices increase the pool from which a firm is able to recruit talented and creative employees. The wider the range of views and backgrounds, experiences and expertise the company attracted, Zhao concluded, the more innovative the company was to solve problems. A diverse, inclusive culture attracts and retains talent and boosts employee morale, Zhao’s research found.

Zhao and her coauthors scoured and analyzed data on publicly traded U.S. firms, looking at new product introductions, patents and other company milestones. They showed that pro-diversity policies enhance future firm value by spurring innovation.

Your first clue here is that even this excerpt contains highly duplicative text. The same idea is repeated several times as an assertion — diversity generates more ideas — and then a broad conclusion is drawn, namely that diversity therefore increases competitiveness.

Only in the end do we see some discussion of actual facts: “new product introductions, patents and other company milestones” hidden behind the Objective™ introduction about “scoured and analyzed data on publicly traded U.S. firms.” The latter part is designed to introduce trust, and conceal the former.

When we look more deeply at this pro-diversity study, we see what was actually done:

Using new product announcements, patents, and patent citations as measures of corporate innovation, we find that corporate policies that promote more pro-diversity cultures, specifically treatment of women and minorities, enhance future innovative efficiency. This positive effect is stronger during economic downturns and in firms that are more innovative, value intangibles and human capital more highly, have greater growth options, have higher cash flow, and have stronger governance. Pro-diversity policies also increase firm value via this stimulating effect on innovative efficiency.

Boiling down: they studied new product announcements, patents, and patent citations. The rest is expansion based on that, or assumptions.

Looking more critically, we see the error. These are not tested products; these are new products and patents, and those have not yet been tested against the markets. In other words, we see more ideas, but we have no idea if these ideas are really new — many patents are near-duplicates — or useful.

As always, one must be suspicious of the human behavior patterns we see at every level in our species. Claiming that something is great because it is new is different from showing that it demonstrates utility; measuring innovation is a substitute for measuring effectiveness.

Returning to a logical and commonsense view, we see that the only factor in innovation that matters is what works, meaning the new ideas that are applied and then demonstrate utility. By the very factors this study uses, it is condemning diversity with faint praise, and that is what we should take away from this propaganda.

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