The business case for demographic diversity in strategic leadership teams: A systematic and critical review of the causal evidence

Abstract

Demographic diversity (e.g., gender, age, race, ethnicity) in strategic leadership teams (i.e., boards of directors and top management teams) has received global attention recently. Policymakers have promoted diversity policies by citing the “business case” for diversity that suggests a positive (causal) effect on firm performance. Our focus is twofold: First, we systematically evaluate the methodological rigor of 64 studies on the relationship between strategic leadership team demographic diversity and firm performance (1994–2023) from Financial Times (FT) 50 journals, finding that ca. 70 percent show implausible causal effects, ca. 20 percent lack sufficient information, and only 11 percent (N = 7) demonstrate plausible causal effects. Second, we synthesize research findings of the seven studies. The five studies on gender diversity yield mixed results: some report positive or negative effects, whereas the majority finds no effects on firm performance. Regarding ancestral and genetic diversity, the studies support the business case argument. Overall, our review provides three key insights: (1) a critical evaluation of the causal evidence regarding the business case for demographic diversity in strategic leadership teams, (2) a synthesis of the research findings by focusing on rigorously conducted studies, and (3) hands-on recommendations for refining future approaches for causal research.