Racially Diverse Leadership and Sustainable Alliance Portfolios

Abstract

In my research, the effects that the racial diversity of firms’ leadership has in deciding the sustainable composition of firms’ alliance portfolios is investigated, defined as the distribution of exploratory, exploitative, and mixed alliances. Grounded in social categorization, information elaboration, and social contact mechanisms, racially homogeneous leadership has a J-shaped relationship with sustainable alliance portfolio composition. Very racially homogeneous or heterogeneous leadership leads firms towards maintaining more exploratory alliances in their portfolio as opposed to moderately diverse leadership, which prefers the safety of exploitative alliances. Further, I explore how racially homogeneous leadership differs from racially heterogeneous leadership in that the former has a higher propensity to maintain more exploratory alliance portfolios compared to the latter. A two-stage analysis on a panel of 128 pharmaceutical and software firms, accompanied by response surface analysis, yields support for our theorizing. This study encourages scholars to further investigate the different weights that social categorization, information elaboration, and social contact exercise on leadership diversity and how they are elemental in firms’ sustainable alliance decision-making.