This study investigates the influence of age diversity on firm outcomes (i.e. firm performance and employee turnover rates) with the moderating effects of human capital inflow. The Categorization Elaboration Model (CEM) suggests that the key process that enables positive effects of diversity depends on the task-related information elaboration process, while socially categorizing each other hinders this process, resulting in the negative influence of diversity. Based on this model, we suggest that age diversity may have mixed effects on firm performance and employee turnover rates, suggesting both positive and negative effects. In line with human capital literature, we also argue that human capital inflow can determine the functional or dysfunctional effects of age diversity on firm performance and employee turnover rates. In particular, we argue that an increase in the influx of human capital leads to the formation of relationships, which in turn suppresses existing social categorization processes and enhances the positive effects of diversity. Using a sample of 283 Korean firms from Korean Women Manager Panel (KWMP) data, our findings show that age diversity is positively related to firm performance and negatively associated with employee turnover rates, suggesting the functional role of age diversity. Additionally, we find that human capital inflow significantly strengthens the functional effects of age diversity. Our study contributes to the literature on diversity and human capital by demonstrating the joint effects of diversity and human capital management.
Read full abstract