Product Innovation and Educational Diversity in Top and Middle Management Teams

Abstract

The effects of diversity in management teams on firm innovation have become an important topic in strategic management. With a few exceptions, however, the literature has focused on diversity in top management teams (TMTs), while the role of diversity in lower management levels, particularly middle management teams (MMTs), has usually been neglected. In this paper, we intend to fill this gap by explicitly differentiating between the effects of diversity in TMTs and MMTs. By matching various firm-level and individual-level datasets, we compile a linked employer–employee panel dataset for Sweden for the period 2004–2012. Focusing on measures of educational diversity, we find that the effects differ considerably between MMTs and TMTs. TMTs’ diversity determines whether firms engage in innovation activities at all, while MMTs’ diversity affects the actual outcome of innovation processes, in particular successful product innovations and their degree of market novelty.