Path-dependency

Organizations and their surrounding environment co-evolve over time (Boschma and Frenken 2006). Metcalfe (1994), as cited by Boschma and Frenken (2006, 20), argues that “territory specific assets are constantly transformed, upgraded, or they get locked-in by the actions and repeated interactions of local agents. That is, organizations continually adapt and transform, intentionally or not, their environment”. From this we understand that people and places produce path dependence (Martin 1999, 80) in that they are in a form of symbiotic relation and are constantly coloring and shaping each other. “Industries` and firms` location decisions respond to geographical unevenness in the labour landscape and incorporate spatial inequality in order to maximize profits; their decisions, in turn, affect workers` future skill levels and shape the future of regional economies” (Aoyama, Murphy, and Hanson 2011, 17). Massey (1984) argued that regional disparities not only came from economic factors, such as labor or capital, but also increasingly from social interactions.

2.3 Diversity

“It is hardly possible to overrate the value . . . of

placing human beings in contact with persons dissimilar to themselves, and with modes of thought

and action unlike those with which they are familiar.

. . . Such communication has always been, and is particularly in the present age, one of the primary sources of progress.”

(Mill 1848)

The quote above by Mill is easily applicable today. Diversity in the workforce is something that is held in high regard by many managers, policy makers, politicians, and so on. Furthermore, in many of today’s organizations, employees are more likely than before to work with people who have different demographic and functional backgrounds (Guillaume et al. 2014). Apple’s former Vice President of Human Resources, Kevin Sullivan, once said, “When you are surrounded by sameness, you only get variations of the same” and henceforth underlined the importance of bringing in people with different outlooks in order to achieve distinct outcomes. This holds the essence of innovation and innovative processes, in which different outlooks are needed in order to create something new.

Diversity in the workforce could bring in an element of new by mixing together people who are diverse and have different ideas, perspectives, and worldviews.

This becomes important in innovation, since it is an interactive process (Lundvall 1992) that involves communication among “employees in a firm and draws on their different qualities from all levels of the organization”

(Østergaard, Timmermans, and Kristinsson 2011, 500).

The article, “The Stranger: An Essay in Social Psychology” (Schuetz 1944), suggests why diversity could affect firm performance, trigger creativity, and

affect innovation. Schuetz (1944, 501-502) writes, “This ‘thinking as usual’, as we may call it, corresponds to Maz Scheler`s idea of the ‘relatively natural conception of the world’ (…), it includes the ‘of-course’ assumptions relevant to a particular social group”. Hence, someone who is coming in from the

“outside” might provide a new view or challenge the “of-course” assumptions that rest in social groups and in organizations. This could be challenged by bringing in people with different heuristics, with different work experiences and educational backgrounds, or from different birthplaces.

We are shaped by our environments, and the development of individual identity or the consciousness of such happens over several steps where the individual first learns how to copy other people’s behavior, then to consciously acknowledge others, and then take the ”generalized other” view on the world and itself (become conscious of oneself). Hence, through this interaction with others, the “self” or perception of the self becomes, and is consequently a social product. We observe other people’s reactions to ourselves and are able to envision how others envision us (Mead 1934). Hence, an important aspect here is that “people perceive, interpret and evaluate the world according to mental categories (or forms of thought, frames or mental models) which they have developed in interaction with their physical and their social/institutional environment. This entails that “perception, interpretation and evaluation are contingent upon the institutional environment, and path-dependent and idiosyncratic to a greater or lesser extent” (Nooteboom 2000a, 71). Hence,

“people with different backgrounds see, interpret and evaluate the world differently to the extent that they have developed in different social and physical surroundings and have not interacted with each other” (Nooteboom 2000a, 71).

There is a connection between this, the work by Mead (1934), and the work by Vygotsky (1962), who claimed that learning takes place through internal cognitive processes that are shaped by extensive contextual interactions. The

“Zone of Proximal Development” (ZPD) is what Vygotsky called the development of learning in others. He believed that a person can only learn so much by themselves, and that through interaction with others, this knowledge can be stretched. For this to happen, there must be some shared knowledge or some sort of mutual starting points for this interaction to take place. When you then place dissimilar people together (that have distinctive worldviews,

interpretations, and evaluations of the world), they need to share some set of mutual characteristics from which to depart in order to communicate and create something together.

Bringing together different views could be one way of creating “kaleidoscope thinking” (Kanter 1968). Just like twisting the kaleidoscope and making new images appear, diversity can twist reality into new patterns and rearrange the pieces to create a new reality (Kanter 1968, 11). Challenging the “of-course”

assumptions (Schuetz 1944) and “established thinking” could be reached by involving diversity across the organization and integrating it to the decision processes is vital for competitive advantage. To “shake things up” and create a new picture, it is important to work more diversely and thinking and acting in a more multi-disciplinary manner; i.e. by arranging regular visits to other parts of the organization, exchanging ideas, visiting other organizations and observing how they work, discussing with critics or “outsiders” or people who hold a different worldview (within and outside the firm), attending conferences within fields that unfamiliar, and seeking knowledge previously unknown to the firm. The latter could be facilitated through increased diversity in the organization, as it will broaden the search scope (Laursen and Salter 2006).

Bringing in diversity to the firm mirrors Schumpeter’s definition of innovation as a recombination of knowledge and resources, and broader internal competence and expertise will give a broader platform on which to carry out search activities which in turn will be reflected in the possibilities of acquiring a greater variety in knowledge.

Thus, when diversity in the workforce increases, the different heuristics available to solve a problem can also increase. Hong and Page (2004) demonstrate that groups that are diverse are better problem solvers than groups that are more homogenous (even if the latter has higher educational achievements). Basset-Jones (2005) argues that diversity could also lead to higher communication costs and misunderstanding, suspicion and conflict, which in turn, hamper innovation through low morale, loss of competitiveness and absenteeism. Basset-Jones (2005, 169) argues that firms “seeking competitive advantage therefore face a paradoxical situation. If they embrace diversity, they risk workplace conflict, and if they avoid diversity, they risk loss of competiveness”. Implicitly, this underscores an important aspect – management. Diversity is often referred to as something that needs to be

managed (Basset-Jones 2005, Guillaume et al. 2014, Eckel and Grossman 2005, Holvino and Kamp 2009, Lauring 2009, Kreitz 2008, Podsiadlowski et al. 2013, Harrison and Klein 2007). One example of this paradoxical situation and the need for management is put forward by Guillaume et al. (2014, 785) by declaring “when mismanaged, such diversity can undermine employee social integration and effectiveness and lead to lower work group performance; when managed effectively, however, as well as facilitating social integration and effectiveness, diversity can also promote creativity and innovation”. Thus, diversity can have good or bad effects on performance, or both, depending on how it is measured, managed, and what the goal is.