Does Diversity in Executive Boards Make a Difference? Nationality Diversity and Firm Performance in German, Dutch and British Multinational Enterprises

Abstract

Previous studies addressing the influence of nationality diversity within the executive board on firm performance led to inconclusive results. In this study, nationality diversity and within board cultural distance are expected to affect MNE performance. Therefore, the following research question is addressed: ‘Does nationality diversity in the executive board influence the performance of a MNE?’ To answer the research question, a dataset of 277 listed MNEs from Germany, the UK and the Netherlands has been used. Research findings did not show convincing support for the main research question, although a relation has been found between nationality diversity and stock market performance within the years 2009-2010. This study has three theoretical implications. For the first time, cultural distance has been related to nationality diversity research and both have been researched within the executive board of MNEs with regard to performance. Second, this study is one of the first studies that has conducted cultural distance on group/organizational level. Third, differences of nationality diversity within the executive boards between Germany, UK and the Netherlands are discussed and tested. Lastly, this study has three implications for practice, applicable for the composition of the executive board of MNEs from Germany, the UK and the Netherlands. First, the findings show that more foreigners within the executive board would lead to higher stock market performance. Second, more executives originating from different countries would lead to a lower stock market performance. Finally, stock market performance is optimal when the average within board cultural distance is low. Results imply that combining these three factors would increase stock market performance.