Do external diversity practices boost focal firm performance? The case of supplier diversity

Abstract

Based on the resource-based view, we propose that external diversity practices such as supplier diversity may affect firm performance. We find that the relationship between supplier diversity and short-term performance (i.e. productivity) is moderated by context such that firms in declining industries experience positive productivity effects while firms in munificent industries witness negative effects. For longer-term profitability (i.e. Tobin's q), we do not find support for a positive relationship between supplier diversity and long-term performance. However, positive supplier diversity effects emerge in munificent environments. Overall, in support of the strategic human resource management approach, we conclude that the effect of external supplier diversity on firm performance is contingent upon environmental munificence, which documented the necessity to include supplier diversity as a relevant component of a comprehensive diversity and equality management system.

Keywords::

• diversity practices
• environmental munificence
• firm performance
• resource-based view
• supplier diversity

Acknowledgements

We thank Tomi Laamanen and Kyle Mayer for helpful comments and Fortune magazine for providing us with its survey data.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

^1. For example, Walmart's notes that “Diversity comes full circle at Walmart through our more than 3,000 minority- and women-owned suppliers. Because of our strong relationships with our suppliers, we are able to deliver the products our customers need at the prices they deserve. Their ideas, products and energy have helped fuel our growth for 50 years and they are an important part of our future” (http://corporate.walmart.com/global-responsibility/diversity-inclusion/our-suppliers). Similarly, Johnson & Johnson's mission statement notes: “We recognize the importance of having a diverse supplier base that reflects our patients and customers around the world. We are committed to working with small and diverse suppliers that can support our long-term growth objectives and add value to our businesses by providing innovative solutions to our marketing, manufacturing and R&D efforts” (http://www.jnj.com/partners/suppliers/supplier-diversity).

^2.http://www.scjohnson.com/en/commitment/diversity/supplier.aspx

Additional information

Funding

This research was supported in part by the Provost's Distinguished Professorship and the Jindal Chair at UT Dallas.