Levels and dimensions of diversity in small businesses: contributions for performance

Abstract

PurposeThe purpose of this study is to propose and test a model on the impact of diversity over performance using a Portuguese national wide comprehensively matched employee–employer dataset of small businesses.Design/methodology/approachThe study uses structural equation modeling to analyze the relationships between variables. The study addresses the impact of top managers and employees' diversity on firm performance considering two dimensions of diversity: knowledge diversity and social diversity.FindingsThe study provides a clear understanding of how workforce diversity affects performance differently at the two hierarchical levels. Both employees' diversities have stronger relations to performance than the diversity of top managers. Results point out to idiosyncratic aspects of services firms' dynamics that should be further explored.Research limitations/implicationsThe study presents some limitations, since it uses data from a single country and the dataset provides limited variables.Practical implicationsThe study offers evidence on the effects of diversity in small businesses alerting managers to acknowledge such influence when recruiting, selecting and training. With regard to services firms, managers should pay close attention to negative impacts of diversity over performance.Originality/valueNever before to the authors' knowledge the managers' level diversity and employees' level diversity (considering two dimensions each) effect on performance have been addressed in a single national wide study.