Navigating the Choppy Waters of Cross-National Diversity: A Tale of Whales, Classrooms, and Startups
Does diversity of national backgrounds improve performance?
Diversity is a complex and contentious issue. You’re exposed to a lot of punditry about it. Most of the dialogue and research focuses on racial and gender differences. Given what I study, I’ve long been interested in what happens when people from a variety of national backgrounds come together. Does it affect performance in any way, positive or negative? Is it helpful for your team, your company, and your community?
Let’s find out by seeing what we can learn from three seemingly disparate scenarios: 19th century whaling voyages, university classrooms, and high-tech firms in Germany.
Harnessing Diversity on the High Seas
In Herman Melville’s Moby Dick, the epic pursuit of the elusive white whale captures the imagination and the perilous reality of the American whaling industry. This iconic novel, set against the vast, unforgiving ocean, mirrors the colossal role that whaling played in American life from the late 18th century through the American Civil War. During this period, whale oil was the glowing lifeblood that lit the lamps of countless homes and streets across the nation, providing essential illumination that was both accessible and reliable. It also served as a crucial lubricant for the machines of the emerging industrial age, while baleen—whalebone—was ingeniously crafted into everyday items ranging from corset stays to carriage springs.
The voyages of whalers drove economic growth in coastal towns, particularly transforming New England into a bustling hub of maritime commerce and shipbuilding. These arduous journeys—which often lasted for years—generated wealth through the direct trade of oil and bone. They also brought rich narratives into the fabric of early American society, as sailors returned with tales of the sea that captivated the public imagination (hence Moby Dick). Whaling was much more than an economic endeavor; it was a forge of American character and an integral part of the nation’s spirit, profoundly shaping the sociocultural landscape of early America.
As it turns out, whaling is also a great setting to study how cross-national diversity affects group performance. (Apologies for killing the poetry and romanticism of this tale…) The crew on board whaling ships was composed of a variety of people from different countries and ethnic backgrounds.
Michele Baggio and Metin M. Cosgel tell the tale using data on 15,000 voyages involving 119,000 people between 1807-1912. They found a U-shaped relationship between ethnic diversity (based on crew members’ birthplace) and ship performance: crews that were either very homogeneous or highly diverse were more effective than those somewhere in between. But here’s the kicker: teams with the greatest diversity also landed the most catches and experienced the highest rates of production—even more than the homogenous crews. So there’s a real payoff to making national diversity work.
One of the empirical challenges of studying this issue is that, in most real-life organizations, the composition of teams is not random. So it becomes impossible to separate correlation from causation.
This is where the whaling context is helpful. Historical accounts and recruitment records show that, when staffing their vessels, agents and captains were driven by the immediate need of filling positions quickly due to labor shortages rather than by any systematic effort to select crew members based on national background. Even mid-voyage recruitments, which frequently happened at ports like those in the Azores or Cape Verde, were primarily aimed at replacing crew members lost to illness, desertion, or death—which inadvertently altered the ethnic diversity of the crew. (The researchers address other potential biases through statistical techniques that I won’t get into here, but which you can find in the paper.)
There’s one more important result I want to highlight: the benefits of having a highly diverse crew increased with the duration of voyages. Crews had more time to adjust to each other’s differences and develop more cohesive working relationships. This makes sense. The benefits of various perspectives, skills, and ideas don’t arise automatically. It takes effort—and time—to create the harmony necessary for the disparate bits to add up to something productive.
Keep that in mind the next time you get invited to pursue Moby Dick. Or if whaling is too far removed from your daily life…
The Role of Diversity in the Classroom
Let’s move onto a more familiar setting by looking into how the diversity of national backgrounds affects performance in a classroom. Ornella Darova and Anne Duchene (fellow researchers at the University of Pennsylvania) explored this issue through a series of experiments in a study involving hundreds of college students. They designed two experiments carried out over multiple semesters with different groups taking the same course.
In Experiment A, student groups tackled two types of creative assignments: one involved generating their own exam questions along with detailed solutions, which they then presented to the class. The other required students to connect economic theories to current events or policy debates, culminating in written paragraphs that were shared and discussed in class. Experiment B streamlined the tasks, focusing solely on solving and presenting solutions to previous exam questions, emphasizing problem-solving skills over creative thinking. Team members were randomly assigned to groups, so the level of diversity was experimentally controlled for.
Like with crews of whalers, they found a U-shaped effect on the quality of output in both experiments. But diversity only had a positive performance effect on creative tasks. On routine tasks, diversity contributed negatively to performance. The broad range of perspectives can lead to breakthrough ideas and innovations, which is essential for creative tasks. This is consistent with the well-accepted theory of innovation as a process of recombination, in which novelty arises from remixing previously disconnected bits of knowledge. However, when the task is about efficiency—requiring uniformity and precision—the friction and inefficiency arising out of diversity takes over.
Echoing one of the key findings in the whaling study, the authors point out that the duration of the class may have hindered the ability of the teams to perform well in standard tasks. Perhaps working together longer than a semester would have produced better results by giving teams more chances to increase cohesion.
Not Just Diversity, but Unusualness
Let’s now move from the classroom to high-tech startups.
A study by Udo Brixy, Stephan Brunow, and Anna D’Ambrosio adds an intriguing twist. They shift the focus from the mere presence of diverse national backgrounds to the concept of “unusualness” in team composition. Using a sample of 13,400 startups in Germany, they measure how unlikely the ethnic combinations within the employees of a startup are compared to the ethnic composition of people in Germany.
They found that startups with high levels of national diversity as typically measured were not significantly more innovative—as measured by whether the firm had produced a novel product, process, or patent within its first two years of existence. However, startups with unusual ethnic combinations are more innovative than those with more predictable, common combinations of foreign-born workers.
This unusualness likely introduces a unique set of cognitive resources and perspectives that can significantly enhance a team’s creative capacity and problem-solving ability. It challenges the conventional approach of simply assembling diverse teams, highlighting the need for strategic and thoughtful diversity that capitalizes on rare combinations of backgrounds. One intriguing implication of this study is that the uniqueness of a firm’s sources of talent can be a source of competitive advantage, but only if the firm periodically updates the sources of talent variety to stay ahead of its competition.
A More General Model: It’s Up to Us!
Can we learn some general lessons from these three studies? I think so.
They remind me of what research on diversity in general (not just based on national background) teaches us. I’ve spent quite a bit of time reading about and discussing this topic with my colleagues at Wharton. As best as I can summarize it, this is the model of diversity and performance that emerges from the psychology and organizational behavior literatures:
As you can see, there is no direct path from diversity to performance. Instead, there’s a positive path and a negative path—and which one we end up with depends on the choices we make in our organizations.
When diversity increases, two things will always happen. You’ll get a more information variety as people bring new perspectives, ideas, and knowledge. You’ll also have people mentally sort into in-groups and out-groups, or what psychologists call social categorization.
Both of those outcomes will lead to conflict. But not all conflict is bad!
The task conflict that arises out of information variety is productive because it leads to better ideas about solving problems or achieving common goals—like catching a whale, completing a group project, or developing a high-tech product. It leads to a positive link between diversity and performance. The interpersonal conflict that arises out of separating into in- and out-groups is unproductive because it’s purely personal—the “I don’t like you” type of disagreement. It leads to negative outcomes from diversity.
This simple model explains why the whaling and classroom studies found a U-shaped relationship between diversity and performance, and why teams with more experience together get greater returns from diversity. It also explains why unusual combinations of backgrounds, by producing really high levels of information variety and task conflict, exhibit high potential for innovative performance.
The crux of benefitting from interactions with people from a variety of national backgrounds is to channel task conflict and minimize interpersonal conflict. That’s where we have a choice! This matters not just for the performance of teams and organizations. It also matters for the ability of entire societies to benefit from the national diversity created by immigration. I talk about this in one of the chapters of my book. But to learn what that’s all about, you’ll have to read it!
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Speaking of the book, just a few brief updates:
Thank you for your overwhelmingly positive and supportive response! Many of you have written heartwarming notes of congratulations and have let me know you purchased a copy. I hope you understand that I don’t take this for granted.
If you haven’t claimed your pre-order bonuses, you can find the instructions here.
I’d love to see you on June 5 at noon as we celebrate the book launch with a webinar co-hosted by the Wharton ESG Initiative and the Migration Policy Institute. You can register here.
Many of you follow me on LinkedIn and Twitter. If you don’t use those platforms, I’m now also on Instagram and TikTok. (This is what writing a book does to you… I’ll probably live to regret it. Sigh…)
Thanks for your continued support and interest!
Until next time,
Zeke