Short answer

When designing organizational structures or recommending leadership strategies, prioritize ethnic diversity on boards as a potential driver of improved financial outcomes, particularly in emerging markets.

Field: Innovation & Design
Source: UEA Digital Repository (University of East Anglia) (2018)
Method: Mixed Methods (Quantitative panel data analysis and qualitative semi-structured interviews)
Sample: 190 firms
Evidence: Moderate effect

Incorporating directors from specific ethnic backgrounds can lead to improved financial returns for companies operating in emerging market contexts. This innovation & design research insight is drawn from a 2018 study published in UEA Digital Repository (University of East Anglia). Using Mixed methods (quantitative panel data analysis and qualitative semi-structured interviews) with 190 firms, researchers explored how this design variable affects real-world outcomes. The key design takeaway: When designing organizational structures or recommending leadership strategies, prioritize ethnic diversity on boards as a potential driver of improved financial outcomes, particularly in emerging markets.

Study

Innovation & DesignHigh ImpactModerate effect

Ethnic Diversity on Boards Positively Correlates with Firm Performance in Emerging Markets

Incorporating directors from specific ethnic backgrounds can lead to improved financial returns for companies operating in emerging market contexts.

UEA Digital Repository (University of East Anglia) · 2018

Key Findings

01A positive and significant relationship was found between the presence of certain ethnic groups on the board and firm performance.
02No significant relationship was found between gender diversity, specific board committees, or non-executive female board members and financial performance.

Application

Design takeaway

How to apply

When advising companies on board composition, recommend the inclusion of directors from diverse ethnic backgrounds, especially in markets similar to Nigeria, and acknowledge that the impact of gender diversity may require further exploration.

Project actions

01When researching leadership, consider the impact of cultural and ethnic backgrounds, not just gender.
02If exploring board composition, use financial metrics like Return on Assets or Tobin's Q to measure performance.

Method & Evidence

AimTo investigate the relationship between board diversity (gender and ethnicity) and firm financial performance in Nigerian companies.

MethodMixed Methods (Quantitative panel data analysis and qualitative semi-structured interviews)

ProcedureStatistical analysis was performed on panel data from 190 firms on the Nigerian Stock Exchange to assess the correlation between the number of women directors, ethnic minority directors, and financial performance metrics (Return on Assets and Tobin's Q). Semi-structured interviews were conducted using a snowballing approach to gain broader perspectives.

Sample190 firms

ContextCorporate governance and firm performance in an emerging market (Nigeria)

Variables

IV["Number of women directors","Number of ethnic minority directors (Yoruba, Igbo, Hausa)"]

DV["Return on Assets (ROA)","Tobin's Q"]

CV["Industry sector","Firm size","Board committees"]

Strengths & Limitations

Strengths

+Uses a mixed-methods approach for a more comprehensive understanding.
+Focuses on an emerging market, offering unique insights compared to studies in developed economies.

Limitations

The study focused only on Nigeria, so results might not apply elsewhere. It also found no clear benefit for gender diversity, which is a common focus in other research.

Reliability & validity

The use of a mixed-methods approach and established financial metrics enhances the study's validity. Reliability could be strengthened by replicating the study across multiple emerging markets.

Think critically

Given that ethnic diversity showed a positive impact but gender diversity did not, what other factors might influence the relationship between board composition and firm performance, and how could these be investigated?

Design Principles

"Leverage diverse perspectives from leadership to enhance organizational performance."

This research highlights that the composition of leadership teams, specifically ethnic diversity, can be a strategic lever for enhancing organizational performance. Designers and strategists can leverage this insight to advocate for more inclusive leadership structures, recognizing that diverse perspectives can translate into tangible business benefits.

What This Means for Your Design

Having people from different ethnic backgrounds on a company's board can help the company make more money, at least in some countries like Nigeria. Having women on the board didn't show the same clear benefit in this study.

How to use in your project

1.Reference this study when discussing the impact of diversity on business outcomes, particularly in emerging markets.
2.Use the findings to justify design choices related to team composition or organizational structure.

Add to My Project

Quick Cite

Paragraph starter

Research by Okeyide (2018) on firms in the Nigerian Stock Exchange found a positive correlation between the presence of certain ethnic groups on corporate boards and improved financial performance, measured by Return on Assets and Tobin's Q. This suggests that diverse leadership, specifically in terms of ethnicity, can be a strategic advantage in emerging markets, though gender diversity did not show a significant impact in this particular study.

Source

UEA Digital Repository (University of East Anglia)

Diversity and performance: a case of board composition of firms on the Nigerian stock exchange

journal · 2018

View source

Questions About This Research

What does the research say about ethnic diversity on boards positively correlates with firm performance in emerging markets?: When designing organizational structures or recommending leadership strategies, prioritize ethnic diversity on boards as a potential driver of improved financial outcomes, particularly in emerging markets. Evidence: UEA Digital Repository (University of East Anglia) (2018).
Why does "Ethnic Diversity on Boards Positively Correlates with Firm Performance in Emerging Markets" matter for design?: This research highlights that the composition of leadership teams, specifically ethnic diversity, can be a strategic lever for enhancing organizational performance. Designers and strategists can leverage this insight to advocate for more inclusive leadership structures, recognizing that diverse perspectives can translate into tangible business benefits.
How can designers apply this research?: When designing organizational structures or recommending leadership strategies, prioritize ethnic diversity on boards as a potential driver of improved financial outcomes, particularly in emerging markets.
What were the main findings?: A positive and significant relationship was found between the presence of certain ethnic groups on the board and firm performance.. No significant relationship was found between gender diversity, specific board committees, or non-executive female board members and financial performance.
What research method was used?: Mixed Methods (Quantitative panel data analysis and qualitative semi-structured interviews) with 190 firms.
How strong is the evidence?: Evidence strength is rated Moderate effect, based on a 2018 journal from UEA Digital Repository (University of East Anglia).
What should I do differently in my next project?: When advising companies on board composition, recommend the inclusion of directors from diverse ethnic backgrounds, especially in markets similar to Nigeria, and acknowledge that the impact of gender diversity may require further exploration.
What are the limitations?: The study did not find a significant relationship for gender diversity, and the findings for ethnic diversity were specific to certain groups within the Nigerian context. The 'business case' for women's inclusion was not definitively supported or denied.