Research has shown that firms with more women in senior positions are more profitable, more socially responsible, and provide safer, higher-quality customer experiences—among many other benefits. And of course, there is a clear moral argument for increasing diversity among top management teams. But when it comes to explaining exactly why having more female executives is associated with better business outcomes, and what specific mechanisms cause those positive changes, existing research is much more limited, Harvard Business Review writes.
Researchers from Lehigh, Maastricht and Antwerp universities recently set out to explore these questions by examining exactly how firms changed their strategic approach to innovation after appointing female executives.
They tracked appointments of male and female executives and analyzed R&D expenses, merger and acquisition rates, and the content of letters to shareholders for 163 multinational companies over 13 years to determine how these firms’ long-term strategies shifted after women joined their top management teams.
First, they found that after women joined the C-suite, firms became both more open to change and less risk-seeking. In other words, these organizations increasingly embraced transformation while seeking to reduce the risks associated with it.
Second, they observed that when companies added female executives, they gradually shifted from the knowledge-buying strategy focused on in mergers and acquisitions toward a knowledge-building strategy often used in internal research and development.
Lastly, the researchers found that how well a new executive was able to integrate into their management team determined their individual impact on decision-making. This seems logical, but there were two factors that helped or hindered their integration: whether there were other women in top management, and whether they were part of a group of appointees.