By Paul Gompers and Silpa Kovvali
When managers and scholars talk about diversity’s impact on organizations and teams, they’re usually referring to the effects on collective accuracy and objectivity, analytical thinking, and innovativeness. On “harder” measures of financial performance, researchers have struggled to establish a causal relationship with diversity—particularly when studying large companies, where decision rights and incentives can be murky, and the effects of any given choice on, say, profits or market share can be nearly impossible to pin down.
So we’ve zeroed in on diversity’s effects in the venture capital industry, which presents fewer barriers to understanding. VC firms are