Gender Diversity and Innovation: The Role of Women’s Economic Opportunity in Developing Countries

This research examines how gender diversity interacts with women’s economic opportunity, such as prevailing laws, practices and attitudes in a country allowing women to participate in the workforce under similar conditions like men, to explain innovation in developing countries. We suggest that the level of women’s economic opportunity in the country, within which firms operate, moderates the effect of gender diversity on a firms’ likelihood to innovate. We examine the proposed moderating effect in a cross-country study using firm level data of the World Bank Enterprise Survey for 15,157 firms in 15 developing countries in South Asia, the Middle East and Africa. We test our hypotheses using a hierarchical binary logistic regression. Our findings support the relevance of women’s economic opportunity for gender diversity in the firm ownership structure and its workforce. We find that gender diversity increases the likelihood to innovate for firms operating in countries with rising levels of women’s economic opportunity on the one hand and decreases the innovation likelihood for firms operating in countries that are at the low end of providing women’s economic opportunity on the other hand. Furthermore, we find a direct positive effect of gender diversity on firms’ likelihood to innovate at all levels in the organization as well as a positive effect of having a female top manager.