The boundary conditions of gender diversity in top teams

In this study, the authors aim to extend previous research and examine the phenomenon of gender diversity on firm performance in the context that of community-based enterprises (CBEs). The study builds on gender role theory and analyzes three factors that affect the relationship between gender diversity and firm performance: the overall percentage of women in the business, the level of participative decision-making and top management team (TMT) compensation.

Data for this study were obtained from the Solidarity Economy Enterprise Database. The Brazilian Government created the database to gather information regarding the status of the Solidarity Economy in the country.

The authors argue and find support for the idea that gender diversity in TMT positively influences firm performance. However, there is a point where higher presence of women in the business starts to be detrimental for firm performance. That is, the authors find that there is a curvilinear relationship between gender diversity in TMT and firm performance. Moreover, they found strong empirical evidence for the influence of compensation in strengthening the effect of gender diversity on firm performance.

The great potential that this study offers applied to the CBEs relies on the fact that these businesses are naturally oriented toward equality, so understanding how the unbalance in gender diversity may affect the firm performance could help us to understand if there is a disconnection between the theory and the practice in terms of how women are positioned.

The paper has important implications for corporate boards and policy-makers, suggesting the importance of increasing the number of women in boards of directors to benefit from the diversity in value, perspectives, background and skills they bring to TMTs. This study focuses on an under-researched context in terms of TMTs – CBEs.

This work shows that gender diversity in top on boards of CBE’s is positive which is aligned to the orientation toward equality that these businesses have. However, at the same time even although having more women is positive for financial performance, there is a saturation point from when the influences starts to be detrimental.

The authors consider that this study raises areas for further consideration in efforts to understand what are the boundary conditions of gender diversity in top teams.