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Cross-Level Effects of Demography and Diversity Climate on Organizational Attachment
and Firm Effectiveness

Author(s): Jorge A. Gonzalez and Angelo S. Denisi
Source: Journal of Organizational Behavior, Vol. 30, No. 1 (Jan., 2009), pp. 21-40
Published by: Wiley
Stable URL: http://www.jstor.org/stable/20542527
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Journal of Organizational Behavior
J. Organiz. Behav. 30, 21-40 (2009)
Published online 22 October 2007 in Wiley InterScience
(www.interscience.wiley.com) DOI: 10.1002/job.498
Cross-level effects of demography

and diversity climate on organizational
attachment and firm effectiveness
JORGE A. GONZALEZ1* AND ANGELO S. DENISI2

1 University of San Francisco, San Francisco, California, U.S.A.
2Tulane University, New Orleans, Louisiana, U.S.A.
Summary We studied the impact of demographic diversity on individual attachment and firm unit
performance in a relatively diverse organization. We implemented cross-level regression to
study gender and race/ethnic categorical, relational, and organizational demography in a
sample of 26 units part of a regional restaurant chain. At the individual level, we found that
diversity climate (DC) moderates the impact of relational and categorical demography on
affective organizational commitment, organizational identification, and intention to quit. At
the organizational level, we found that DC moderates the impact of organizational diversity on
firm productivity and return on profit. We discuss the importance of organizational DC as
organizational context on individual attachment, and implications for firm effectiveness in
diverse organizations. Copyright ? 2007 John Wiley & Sons, Ltd.
Introduction
The population of the United States is becoming increasingly diverse, and enhancing diversity at work
is the logical response to changing demographics and good social policy. Yet, scholars disagree about
the overall impact of diversity. Several studies report that it has beneficial outcomes such as innovation
and competitive advantage (e.g., Richard, Barnett, Dwyer, & Chadwick, 2004), while others report
adverse effects on retention and firm performance (e.g., Sacco & Schmitt, 2005). The general
conclusion is that diversity has potential for both (see reviews by Jackson, Joshi, & Ergardt, 2003;
Ragins & Gonzalez, 2003; Tsui & Gutek, 1999; van Knippenberg, De Dreu, & Homan, 2004).
This makes it important to study the circumstances that lead to either positive or negative diversity
effects. As a result, scholars have searched for contextual factors that might serve as moderators. This
includes the nature of the type of diversity being considered, such as whether an attribute upon which
the diversity measure is based is task-related (e.g., Pelled, Eisenhardt, & Xin, 1999) or occurs at a deep
level (Harrison, Price, Gavin, & Florey, 2002). Meta-analytic data, however, have failed to support
outcome-based diversity type taxonomies (Webber & Donahue, 2001), leading other scholars to
suggest that all diversity types can have both positive and negative effects (i.e., van Knippenberg et al.,
* Correspondence to: Jorge A. Gonzalez, College of Professional Studies, University of San Francisco, 2130 Fulton Street, San
Francisco, CA 94117, U.S.A. E-mail: jorge@usfca.edu
Received 6 November 2006

Revised 13 July 2007
Copyright ? 2007 John Wiley & Sons, Ltd. Accepted 27 August 2007
22 J. A. GONZALEZ AND A. S. DENISI
2004), and broadening the search for potential moderators. Also, despite evidence that context is very
important, scholars often do not study or provide information about factors surrounding their research
(Jackson, et al., 2003).
It is critical to study the individual, organizational, and societal factors that shape the effects of diversity.
We designed this study to explore the moderating role of a contextual variable, diversity climate (DC). We
adopted a cross-level approach to scrutinize the impact of individual and organizational demography. This
allowed us to explore the role of DC on the manner categorical and relational demography influence
individual attachment, and the manner firm level demography influences firm effectiveness. A pictorial
representation of our theoretical framework is presented in Figure 1.
Diversity and the Theoretical Models behind its Study
Broadly defined, diversity refers to differences between individuals on any personal attributes that
determine how people perceive one another (Ragins & Gonzalez, 2003). Diversity studies have
traditionally focused on demographic attributes such as race/ethnicity, gender, age, tenure, and
education (van Knippenberg et al., 2004), and a few others have focused on deep-level dimensions such
as personality and cultural values (e.g., Harrison et al., 2002). We chose to focus on race/ethnicity and
gender in the present study. These dimensions have been oftentimes studied, are observable and
unchangeable, provide a strong basis for social categorization, and are related to status and resource
access at the society level (Alderfer & Smith, 1982).
As a construct, diversity is associated with interrelated effects that occur at different levels of analysis. For
example, work group demographic composition has been found to influence individual outcomes such as
turnover (e.g., Tsui, Egan, & O'Reilly, 1992) and work group outcomes such as group conflict (Pelled et al,
1999), which in turn can influence organizational performance (Richard, 2000). Furthermore, diversity
itself has been operationalized in different ways relying upon different levels of analysis. Specifically, Tsui
Individual Level
Demographic Dissimilarity
Proportion of gender different others
Proportion of racially/ethnically different
others
?I? Organizational Attachment

Affective Organizational Commitment
Interaction
Organizational Identification
Lower intention to quit
_I_
Categorical Demography
Gender
Race/Ethnicity
Organizational Level
Organizational Demography Firm Effectiveness

Gender Heterogeneity Return on Profit
Race/ethnic heterogeneity Return on Income
Productivity
Figure 1. Theoretical model
Copyright ? 2007 John Wiley & Sons, Ltd. /. Organiz. Behav. 30, 21^0 (2009)
DOI: 10.1002/job
DEMOGRAPHY AND DIVERSITY CLIMATE 23
and Gutek (1999) differentiate among different ways of thinking about diversity. The categorical approach
refers to the study of simple demography, or the direct effects of being a member of a specific social group,
such as the repercussions of being Hispanic. The relational approach focuses on the effects of being different
from referent others in a social unit, such as the effects of being Hispanic and having an Anglo supervisor.
Finally, the compositional approach focuses on the structural properties or the demographic distribution of a
social unit, such as the role of work group demographic diversity on its performance. Older studies tended to
rely upon the categorical approach, but more recent work has relied upon the theoretically richer relational
or structural approaches (Riordan, 2000).
For example, findings from the relational approach typically suggest that being distinct from others in a
social unit is detrimental for the focal person (van Knippenberg et al., 2004). This approach draws from
social identity theory (Tajfel, 1982), which suggests that people define themselves and others through social
categories and display an in-group bias (Turner, 1987). In addition, the closely related similarity-attraction
paradigm (Byrne, 1971) holds that people are attracted to others who are similar to them in attitudes, beliefs,
and personality. Given that it is difficult to learn about these dimensions, people infer similarity, instead,
from visible traits. Minority group status emphasizes distinctiveness, so members of demographic minority
groups are more likely to categorize themselves (and to be categorized by others) in terms of demography
(Simon, Hastedt, & Aufderheide, 1997). Not surprisingly, demographically similar co-workers prefer
working with each other (Glaman, Jones, & Rozeele, 1996).
In contrast, embedded intergroup relations theory (Alderfer & Smith, 1982) upholds that numbers,
proportions, and power structure in organizations matter because they reflect the power and social
structure of a society. This supports the study of categorical demography. This approach has recently
waned in favor of the other two, perhaps because early research was based on a faulty assimilationist
paradigm (Nkomo, 1992) and focused on traits and overlooked context (Tsui & Gutek, 1999), leading
to weak and inconsistent results (Williams & O'Reilly, 1998). Nonetheless, Linnehan and Konrad
(1999) stated that this change leads to a 'diluted' definition for diversity. They criticized research on
demography for losing track of its initial focus, the experience of historically disadvantaged groups, in
favor of the study of all social categories.
In addition, relational demography studies report asymmetrical effects across demographic
categories. Goldberg (2005) found that men and women reacted differently to job applicants of
different gender than theirs. Kossek and Zonia (1993) reported that women and people of color valued
organizational efforts to promote diversity higher than white males and had better perceptions of
women and colleagues of color. Also, Tsui et al. (1992) and Chatman and O'Reilly (2004) found that
the experience of men as dissimilar to others in a work group is more detrimental than that of women.
However, Chatman and O'Reilly (2004) collected data in a gender-integrated workplace, while Kossek
and Zonia's (1993) setting was a predominately white male university. This suggests that the social
categorization and similarity-attraction frameworks are not sufficient to explain behavior without
regard to categorical demography.
The Effects of Demography on Individual Attachment
Organizational commitment and identification are associated with organizational behaviors such as
absenteeism, turnover, and social interaction, which matter to organizational performance (Dutton,
Dukerich, & Harquail, 1994). Commitment refers to the strength of a member's identification with and
involvement in an organization. It is comprised of a strong belief and acceptance of organizational
goals and values, willingness to exert effort on behalf of the organization, and desire to maintain
Copyright ? 2007 John Wiley & Sons, Ltd. /. Organiz. Behav. 30, 21-40 (2009)
DOI: 10.1002/job
membership in it (Mowday, Porter, & Steers, 1982). Meyer and Allen's (1997) tripartite concept
comprised of affective, continuance and normative commitment. From these, affective organizational
commitment has the strongest organizational benefits and would seem to be an outcome of situations
where diversity involved social conflict.
Dissimilarity can also affect an awareness of a shared experience or common purpose with the
organization. This constitutes organizational identification, a cognitive perception of oneness with the
organization that occurs when members believe they possess the attributes that characterize it (Dutton
et al., 1994; Mael & Ashforth, 1995). Demographically different employees may be less likely to
identify with the organization. Tsui et al. (1992) stated that demographic attributes matter to the
construction of a self-identity within an organizational context. Employees may ask questions such as
Ts this my kind of organization?' and 'Do I belong here?' and answer them based on perceived
demographic similarity. Low degrees of commitment or identification may eventually lead to intention
to quit and turnover. These issues may arise for minority employees regardless of the demographic
make-up of their work units. We therefore offer the following two hypotheses as a replication of
past studies, and as a means of framing our subsequent ideas about the role of DC as context.
Hypothesis 1: Gender and racial/ethnic demographic dissimilarity from others in a firm will be
negatively related to affective organizational commitment and organizational identification, and
positively related to intention to quit.
Hypothesis 2: Categorical demography will be related to affective organizational commitment,

organizational identification, and intention to quit such that women and people of color will be less
attached to the organizations in which they work.
Being different and attached
Belonging to a social group that is underrepresented in an organization or that has less power in a society
does not always result in negative feelings and behaviors. Social identities become relevant when they make
sense in the social context (Oakes & Turner, 1986). Numerical representation influences social category
salience, but demographic group membership influences attitudes because situational circumstances make
that social category salient to the focal person (Randel, 2002). For instance, the presence of a person from a
different country in an otherwise nationally homogeneous team does not mean that the person will
invariably view him or herself as a foreigner. This self-categorization is more likely to occur, however, if
people at work discuss cultural differences or comment on his or her accent. Also, a gender discrimination
lawsuit may make gender identity meaningful and more relevant than other identities. The fact is that the
experience of organizational life is rather immediate for people at work and, all else held equal, work role
distinctions could be more salient than demographic ones. However, demographic categories can become
salient and overshadow work role identities.
The role of DC
DC refers to the aggregate member perceptions about the organization's diversity-related formal
structure characteristics and informal values. Climate as an organizational-level variable is comprised
of the perceptions organizational members share (Schulte, Ostroff, & Kinicki, 2006), such as global
reactions and ideas resulting from the organization's efforts to promote diversity (Kossek & Zonia,
1993). People's reflections on whether an organization is fair toward all social groups are central to DC
Copyright ? 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 30, 21-40 (2009)
DOI: 10.1002/job
(Mor Barak, Cherin, & Berkman, 1998). Justice is of primary importance in the experience and
sensemaking of diversity-related events at work (Roberson & Stevens, 2006). Nonetheless, while
organizational justice taps aspect of distributional, procedural, and interactional justice (see Colquitt,
Conlon, Wesson, Porter, & Ng, 2001), DC is related to the inclusion or exclusion of people from diverse
backgrounds (Mor Barak et al., 1998), and only to the justice-related events pertinent to the balance of
power and relations across social groups (Kossek & Zonia, 1993).
DC can shape the effects of demographic diversity on individual outcomes. Ely and Thomas (2001)
showed that different organizational perspectives on workforce diversity (which constitute climate) are
associated with the manner in which organizational members express and manage diversity-related
tensions. Productivity is enhanced when people believe that cultural differences drive diverse knowledge
and insight, but not when people assume that diversity is only valuable to gain niche markets or to avoid
blatant discrimination or lawsuits. Moreover, Brickson (2000) states that identity orientation shapes
diversity effects. Interpersonal integration, work organization, performance measurement, and reward
structures?factors that may be perceived by members to represent DC?activate member identity
orientations into individual, collective, or relational. Diversity is beneficial under a relational identity
orientation characterized by cooperation and dense, integrated relationship networks.
Perceived adversity or support may increase member attentiveness to the implications of a given
context. Randel (2002) found that an organizational structure with evident proportional differences
encourages demographic identification. Ely (1994) found that female and organizational member
identities were in conflict in an organization with an adverse climate for women. In contrast,
Bacharach, Bamberger, and Vashdi (2005) found that higher relational demography damaged race
relations, but that this was moderated by shared perceptions of peer support. DC may trigger
demographic identity salience and influence attachment.
We suggest, therefore, that the DC of an organization will influence demographic identity salience and
therefore shape the impact of demography on organizational attachment. This may be possible for either
relational or categorical demography. Also, it may be stronger for disadvantaged social groups when the
proportions of similar others is low.
Hypothesis 3: Diversity climate will moderate the impact of gender and racial/ethnic demographic
dissimilarity to others in a firm unit on affective organizational commitment, organizational
identification, and intention to quit. Dissimilarity effects will be stronger when diversity climate is
adverse and weaker when diversity climate is supportive.
Hypothesis 4: Diversity climate will moderate the impact of categorical demography on affective
organizational commitment, organizational identification, and intention to quit. Attachment will be
higher for whites than Hispanics and African-Americans, and for women than for men, when
diversity climate is adverse.
Hypothesis 5: Diversity climate and categorical demography will interact to moderate the effects of
demographic dissimilarity on affective organizational commitment, organizational identification,
and intention to quit. Dissimilarity effects will be greater for Hispanics and African-Americans than
for whites, and for women than for men, when diversity climate is adverse.
Organizational-level demography effects
Diversity-related scholarship at the organizational level of analysis is limited. Studies often focus on
different dimensions of diversity (such as a manager's functional area of expertise, cf., Hambrick,
DOI: 10.1002/job
Seung Cho, & Chen, 1996), and they typically do not examine the mechanisms responsible for
organizational-level diversity effects (see Lawrence, 1997). Furthermore, the results of the small
number of studies that have been conducted are inconclusive. For example, Richard (2000) proposed
that organizational racial diversity was a source of sustained competitive advantage and greater
performance. He relied upon the resource-based view (Barney, 1991) in suggesting that fit between a
firm's demographic composition and an increasingly diverse marketplace was valuable. He also argued
that a diverse human capital is socially complex and hard to transfer across organizations, hence
difficult to imitate. Moreover, despite increasing societal diversity in the U.S.A., organizational
diversity is still rare. Nonetheless, Richard (2000) did not find support for a direct effect between
diversity and firm performance.
On the other hand, Sacco and Schmitt (2005) argued that diversity should lead to lower
organizational performance. They suggested that organizational diversity's effects on turnover would
negatively influence firm performance, while the social integration and cooperation needed to deal with
the diverse workforce would distract managerial focus away from the bottom-line in favor of diversity
management, and further hurt firm performance. They found limited support for a negative association
between racial diversity and profit, but failed to find any association between either age or gender
diversity and profits. But, yet another study (Richard et al., 2004) reported that demographic diversity at
the firm level was associated with several beneficial outcomes such as innovation, creativity, problem
solving ability, and increased competitive advantage.
In addition, the results of some of these studies further suggest that this association may be complex
and not linear. For example, Earley and Mosakowski (2000) found that the degree of group cultural
heterogeneity influenced performance-related variables in a curvilinear manner. Diversity was most
likely to be associated with negative outcomes when the group was moderately diverse, while
homogeneous and heterogeneous teams showed little evidence of problematic social categorization
processes. This suggests a U-shaped association between diversity and performance. Their explanation
was that homogeneous groups do not engage in the social categorization processes that heterogeneous
groups do, but these processes decrease as the group becomes so diverse that fragmentation and
subgroup formation are less likely to occur. Similarly, Richard et al. (2004) found evidence of a
U-shaped association between manager racial diversity and financial performance. This corroborates
studies within the strategic management literature that suggest that the effects of human capital
variables on firm performance are complex and not linear (e.g., Hitt, Bierman, Shimuzu, & Kochhar,
2001).
Given the mixed results in the low number of empirical studies on the organizational diversity-firm
financial performance association, it does not seem feasible to form a theory-based research hypothesis.
The true nature and shape of this association, it would seem, is more complex than a simple association
and can only be understood in the presence of contextual factors that can act as moderators. Therefore,
at present, the potential association between diversity and firm performance will be stated as the
research question that follows:
Research question 1: What is the association between organizational diversity and firm
effectiveness?
Potential contextual moderators
Given the inconsistent findings reported above, several scholars have attempted to identify mechanisms or
contextual factors that influence the association between diversity and firm performance. For instance,
Copyright ? 2007 John Wiley & Sons, Ltd. /. Organiz. Behav. 30, 21^0 (2009)
DOI: 10.1002/job
Chatman and Spataro (2005) studied the role of organizational cultural values, classifying organizations
emphasizing common interests and fate as collectivist, and those emphasizing individuality and
distinctiveness as individualistic. Collectivistic organizations displayed salient organizational member
identities, greater intergroup interaction, and lower and more beneficial conflict as diversity increased, but
this was not the case for more individualistic firms. Moreover, despite not finding a main effect for diversity,
Richard (2000) found that strategic orientation moderated the impact of diversity on financial performance.
Racial diversity was positively related to firm performance under a growth strategy, when creativity and
flexibility are needed, but negatively related to it under a downsizing strategy.
Time is another potential contextual moderator. Early and Mosakowski (2000) posit that, in the long
run, the variety of perspectives, values, and skills offered by diversity is more likely to influence
performance than problematic social categorization processes. This may occur because time allows
people to interact and form a hybrid group culture, which limits affinity subgroup formation.
Additionally, the time team members spend collaborating limits the influence of surface-level (i.e.,
demographic) differences on social relations in favor of more substantive deep-level (e.g., culture and
personality) differences (Harrison et al., 2002).
We suggest that DC is a potential contextual moderator in the organizational diversity-performance
association. As discussed earlier, DC shapes the manner in which diversity leads to individual
outcomes such as feelings of fairness and demographic identity salience. Diversity influences firm
effectiveness when members believe that cultural differences are associated with different knowledge,
experience, and insight (Ely & Thomas, 2001) and when a supportive climate encourages
demographically dissimilar peer integration, intimacy, and knowledge sharing (Bacharach et al., 2005).
In a diverse organization, a supportive DC would weaken in-group bias and social categorization
processes, leading to lower adverse impact on intergroup conflict and social integration. If managerial
efforts to manage diversity are likely to take away form the financial bottom-line (Sacco & Schmitt,
2005), a supportive DC would mitigate the negative impact of diversity of performance.
Time and strategy influence the nonlinear pattern of the diversity-performance association (Early &
Mosakowski, 2000; Richard et al., 2004). It is reasonable to expect that DC would have a similar
moderating role. A supportive DC, as discussed earlier, is likely to be accompanied by lower bias, conflict,
and other social categorization problems. In this condition, diversity is more likely to lead to positive
creativity and information processing results. Thus, one can expect that the positive, linear association
between organizational diversity and performance described earlier holds in these conditions.
In contrast, an adverse DC may lead to a more complex, curvilinear association because it is likely to
highlight social categorization and similarity-attraction processes. Under these circumstances, moderate levels
of organizational heterogeneity would lead to subculture creation, fragmentation, and other intergroup
problems that divert managerial efforts away from financial objectives. Nonetheless, a high degree of diversity
may preclude subgroup identification in favor of a common culture, which may counter adverse effects.
Thus, diversity should have a positive and simple association with organizational effectiveness under
a supportive DC conditions. On the other hand, a U-shaped curvilinear association between
organizational diversity and firm effectiveness is likely to occur under an adverse organizational DC. In
these conditions, moderate levels of diversity are likely to be detrimental, while relative homogeneity
or very high heterogeneity may buffer adverse DC effects. Therefore, we suggest the following
hypothesis:
Hypothesis 6: Diversity climate will moderate the effects of gender and racial/ethnic organizational
demography on firm effectiveness, such that organizational demography will have a positive
association with firm effectiveness when diversity climate is supportive and a U-shaped association
when diversity climate is adverse.
DOI: 10.1002/job
Method
Research context
We collected data from employees working in a regional restaurant chain from the Southwestern
United States with some presence in the Southeast. The concept of the restaurant is that a customer
places an order at the counter and a line of food handlers prepares the food fresh, which is then brought
to the table. Thus, there is much greater employee interaction than at other restaurants. Comparing the
demographic characteristics of the sample with the population showed a close match. Both the sample
and population were quite diverse. The average age of the respondents was 29 years old. 56.3 per cent
of the respondents were women, 54.7 per cent were White, 33.5 per cent were Hispanic, 9.6 per cent
were African-American, and the rest were Asian, a non-listed ethnicity, or did not provide such
data. 23.5 per cent of respondents had a managerial position, 14.3 per cent as assistant managers and
9.1 per cent as managers, and the rest were hourly employees.
Procedure
We sent surveys to 1069 employees in 30 restaurant units and offered a raffle of $100 as an incentive.
Two hundred and ninety-one surveys were returned for a 27.2 per cent response rate. We excluded
incomplete surveys and those that could not be referenced to a unit, or that belonged to units with less
than three cases. The final sample was 271 cases in 26 units. The corporate office provided archival data
(demographic composition, sales, income, and wage and other expenses). Given the demographics, the
bilingual first author translated the survey into Spanish and three bilingual Ph.D. students
back-translated it to check its accuracy. Fifty surveys were completed in Spanish. We found no
(significant) differences for this group relative to other Hispanics on any measure.
Measures
Individual organizational attachment

We used Meyer, Allen, and Smith's (1993) six-item seven-point Likert-type revised scale to measure
affective organizational commitment. Coefficient alpha reliability was .82. We used Mael and
Ashforth's (1995) five-item five-point Likert-type measure of organizational identification. Coefficient
alpha was .83. Also, we used Cammann, Fichman, Jenkins, and Klesh's (1979) scale of intention to
quit, comprised of three seven-point Likert-type items. Coefficient alpha for this scale was .83.
Individual demography
Euclidean distance is the traditional measure of relational demography (e.g., Tsui et al., 1992), but it
does not account for categorical demography or asymmetrical effects (Riordan, 2000). Thus, we
implemented an interaction approach (e.g., Bacharach et al., 2005; Joshi, Hui, & Jackson, 2006). We
measured relational demography as the proportion of different others in a unit, having separate scores
for gender and race/ethnicity. We obtained proportions by assigning a zero to each similar person and
a 1 to each different person in the unit. We used all race/ethnicity categories (white, Hispanic,
African-American, Asian, and other). Although past studies (e.g., Tsui et al., 1992) have computed
relational demography using the sample, we computed this measure in reference to the unit populations
using archival data.
We measured categorical demography using dummy variable coding for race/ethnicity and a
dichotomy for gender (1 = female, 0 = male). An interaction between both variables was implemented.
Copyright ? 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 30, 21^10 (2009)
DOI: 10.1002/job
Although previous studies have measured race as a dichotomy (white/Black or white/people of color;
e.g., Bacharach et al., 2005; Joshi et al., 2006), we were able to differentiate across whites,
African-Americans, and Hispanics. However, the 'Asian' and 'other' categories were excluded due to
the low number of cases in them.
Organizational demography
We used Blau's (1977) index of heterogeneity to measure racial/ethnic (white, Black, Hispanic, and
Asian) and gender. The index is calculated as 1 minus the sum of the squared proportions of people in
each category. Index scores for race/ethnicity ranged from .33 to .67, and from .38 to .50 for gender
(from a possible 0 to .80). These scores indicate high overall diversity compared to other studies (e.g.,
Richard et al., 2004).
DC
DC was measured with the 10 Likert-type items that comprise the organizational dimension of
Diversity Perceptions Scale by Mor Barak et al. (1998). Coefficient alpha was .80. We aggregated
measure to the work unit level of analysis. The r(wg) scores ranged from .71 to .96, with an aver
.86, indicating adequate interrater agreement. The ICC(l) value was .13, indicating little but signi
between-group variance, and the ICC(2) value was .58, indicating marginal reliability of the gro
means. This indicated sufficient reason to study organizational-level DC (Klein et al., 2000).
Firm unit performance

We measured firm performance in terms of employee productivity, return on profit, and retu
income. Return on profit consists of earnings minus cost of goods sold as a percentage of total s
Return on income consists of firm revenue minus costs of goods sold and operation expen
percentage of total sales. This measure of financial performance has been used in other studies
privately run restaurants (e.g., Davis, Schoorman, Mayer, & Tan, 2000). Also, we measu
productivity as a ratio of 1?wage expenses/net sales for the year in question. Therefore, this me
is an index of return on wages but also an index of employee productivity relative to wage costs
relevant to the food services industry where wages are a large and controllable portion of bus
expenses.
Control variables
We controlled for organizational tenure (number of years) and position level (0 = hourly employee,
1 = general or assistant manager) given that they influence the outcomes of interest (Dutton et al., 1994;
Meyer & Allen, 1997; Mobley, Griffeth, Hand, & Meglino, 1979). We controlled for organizational
size (number of employees) in the organizational-level study.1
Results
We ran two separate sets of cross-level ordinary least squares regression equations to test our
hypotheses. Cross-level regression includes an aggregated term, but uses a single equation and does not
provide error term estimates as accurate as hierarchical linear modeling (HLM). However, small
1 We controlled for the proportion of whites and males in the unit because Blau's index is blind to predominant groups (e.g. it treats
a mostly -white group the same as a mostly Hispanic one) and has been done before in other studies (e.g. Richard et al., 2004).
However, it introduced multicollinearity and the controls were deleted. The significance of the other effects did not vary.
DOI: 10.1002/job
Table 1. Means, standard deviations, and correlations for individual-level outcomes
Variables Mean SD 123456789 10

1. Affective organizational 27.81 8.05 (.82)
commitment
2. Organizational 19.96 3.81 .58 (.83
identification
3. Intention to quit 8.88 4.98 -.58 -.4
4. Race/ethnic dissimilarity 0.55 0.13 .01
5. GD 0.52 0.08 -.03 .02 -.04 .04
6. Tenure 2.48 3.01 .19 .16 -.12 -.03 .04
7. DC 30.90 4.92 .09 .05 -.15 -.25 .11 .07
8. Position level 0.24 0.63 .28 .39 -.21 -.13 .10 .25 .07
9. Gender 0.56 0.50 .03 .13 -.09 .00 .58 .05 .07 .23
10. African-American 0.10 0.29 .03 .00 -.06 .57 -.06 -.04 -.14 -.15 -.12
11. Hispanic 0.33 0.46 .01 -.09 .02 -.05 .06 .05 -.03 -.21 .06 -.23
Note: N =291.
Correlations above .13 are significant at p < .05. Reliabilities (alpha) for individual-level measures are in parentheses.
samples can be problematic in HLM. Cross-level regression is simpler and more stable, and may be
more appropriate for small sample nested designs (James & Williams, 2000).2
Individual demography
Means, standard deviations, correlations, and coefficient alpha reliabilities for the scale measures used
in the individual demography regression equations are reported in Table 1. Results for individual
demography and DC tests are reported in Table 2.
The predictor variables were mean centered to avoid multicollinearity. All interactions were probed
according to Aiken and West (1991), and the continuous variables are presented with a range of one
standard deviation above and below the mean. Affective organizational commitment, organizational
identification, and intention to quit were regressed on relational and categorical demography, their
interaction, and on DC. The results for this step corroborate some expectations from prior diversity
research (e.g., Tsui et al., 1992). Gender dissimilarity (GD) was negatively related to affective
organizational commitment and organizational identification, showing partial support for Hypothesis
1. Moreover, the interaction of gender with GD was negatively related to commitment (b = 23.86,
p < .05) and identification (b? 10.17, p < .05). Its depiction in Figure 2 shows that men are less
identified and committed to their organizations the more dissimilar they are from others in their units in
terms of gender, but this did not occur for women. These effects were not significant for intention to quit
and racial/ethnic dissimilarity (RED) was not related to either one of the outcome variables. No
significant effects were found for categorical demography, failing to support Hypothesis 2.
The second models show that the interaction of DC with GD is significant for intention to quit
(b=?1.7l,p< .05), indicating that those who are most different from others in terms of gender are more
2We also performed an HLM analysis for the individual-level study using HLM6 (Raundenbush & Bryk, 2002). We fitted 12
different models analogous to the regression models. The 'slopes-as-outcomes' analysis with diversity climate as a level-2
variable was used to test the moderating effects of diversity climate on relational and categorical demography, and their
interaction. The results of the fixed parameter estimates indicated significance for the same variables as the regressions, except for
the interaction of gender with gender dissimilarity, which is not a cross-level effect. Nonetheless, the outcome variables did not
present significant between-group variance in the one-way ANOVA, an HLM requirement (Hoffman, 1997).
DOI: 10.1002/job
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DOI: 10.1002/job
(a) 30
? 25 - Women
k s Men
v o
fe
<
20
Gender Dissimilarity
(b) 25
- Women
20 Men
15
(c)
- Supportive
Diversity
Climate
Adverse
Diversity
Climate
Figure 2. (a) Moderator effect of gender on the relation between affective organizational commitment and GD.
(b) Moderator effect of gender on the relation between organizational identification and GD. (c) Moderator effect
of DC on the relation between GD and intention to quit
likely to quit, but that this association is weaker when the DC is supportive. This association is depicted in
Figure 2 and provides partial support for Hypothesis 3. Moreover, in the third models, the interaction of DC
with categorical diversity was significant on commitment (b= 1.50, p < .05) and identification {b ? .18,
p < .05) for African-Americans. Figure 3 shows that, regardless of proportions, African-Americans are
more committed to the organization than others, but that this difference fades away as DC is more adverse.
DOI: 10.1002/job
(a)
? *. 35
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American
al
PI - - - Other
O g 30
V o
< 25
Diversity Climate
(b)
30
ce ?G 25
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-C ce American
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*S ?
? g 20
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15
Diversity Climate
(c)
20
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8-?r -o-Other
1 10 (Supportive
Climate)
S 5 -o-Other (Adverse
Climate)
o
Racial/Ethnic Dissimilarity
Figure 3. (a) Moderator effect of race/ethnicity on the relation between DC and affective organizational
commitment, (b) Moderator effect of race/ethnicity on the relation between diversity and organizational
identification, (c) Moderator effect of DC on the relation between RED and intention to quit
Also, African-Americans identified less strongly with the organization than other ethnicities, but this did not
occur when DC was supportive, providing partial support for Hypothesis 4.
We also tested the moderation of DC and relational demography across gender and ethnicity in the
fourth models. The three-way interaction for DC, relational demography, and being Hispanic
(b = ?5.69,/? < .05) indicates that for Hispanics, being ethnically different led to intention to quit when
DC was adverse, but not when it was supportive. This was not found for African-Americans or women.
This is depicted in Figure 3 and provides partial support for Hypothesis 5.
DOI: 10.1002/job
Table 3. Means, standard deviations, and correlations for organizational demography

Variable Mean SD 1
Size 51.96 14.50

DC 31.20 4.54 -.07
Return on profit 63.04 1.82 .07 -.13
Return on income 13.60 6.04 .44 .02 .68
Productivity 77.65 1.65 .30 -.04 .62 .75
Race/ethnic heterogeneity 0.57 0.08 .09 -.06 .00 .09 -.13
GH 0.47 0.03 -.07 -.15 .02 .08 .08 -.33
Note: N= 26.
Correlations above .38 are significant at p < .05.
Organizational demography
We examined the effects of demographic heterogeneity moderated by DC on firm performance

(productivity, return on income, and return on profit). We included squared terms for the diversity
variables to test for curvilinear associations. Means, standard deviations, and correlations are reported
in Table 3. Regression results are reported in Table 4.
The results for the interaction between DC and racial/ethnic heterogeneity (RH) (b = 2.48, p < .05)
show that RH had a negative association to productivity under adverse DC conditions, but positive
under favorable ones. We also found a significant interaction between DC and RH on return on income
(? = 8.56, p<.05), indicating a negative association when DC was adverse, but positive when
supportive. This was not found for return on profit.
In addition, the results show significant interactions between the squared term for gender diversity
and DC on productivity (?=-222.14, p<.0l) and return on profit (? = -298.90, p<.0l). This
Table 4. Results of cross-level regression analysis for organizational demography
Productivity Return on income Return on profit
Variable Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Firm size .01 .04 -.03 .15 .15 .08 -.01 .00 -.03
RH -2.53 -15.07 -19.13** 4.17 -19.03 -24.55 -1.06 -1.04 -5.91
GH -.05 1.36 -20.29 38.99 11.83 -2.06 -.01 5.95 -15.65
DC .01 .29** .09 .53 -.04 .25
Interaction terms
DC x RH 2.48* -.27 8.56* 2.08 1.65 -.97
DC x GH 5.47f .27 1.62 -1.36 2.98
Squared and
interaction terms
RH squared -91.22* -112.16* -177.59 -164.22 -13.62 -30.40
GH squared -76.05 -78.32 -409.85 -450.31 109.77 136.99
DC x RH squared -17.241" -31.45 -10.88
DC x GH squared -222.14* -304.78 -298.90*
R2 .31 .44 .74 .42 .26 .48 .10 .05 .43
AR2 .30* .06 .34*
Note: Results are unstandardized regression coefficients

><.05; **/?<.01; **><.001; jp<.10.
DOI: 10.1002/job
(a)
(b)
Supportive
Diversity
Climate
-Adverse
Diversity
Climate
Race/Ethnic Heterogeneity
(c)
-Supportive
Diversity
Climate
-Adverse
Diversity
Climate
Gender Heterogeneity
(d)
-Supportive
Diversity
Climate
-Adverse
Diversity
Climate
Gender Heterogeneity
Figure 4. (a) Moderator effect of DC on the relation between race/ethnic heterogeneity and employee pro
ductivity, (b) Moderator effect of DC on the relation between race/ethnic heterogeneity and return on income,
(c) Moderator effect of DC for the curvilinear relationship between GH and employee productivity, (d) Moderator
effect of DC for the curvilinear relationship between GH and return on profit
indicates that the association of gender heterogeneity (GH) to productivity is inversed U-shaped when
DC is supportive, but U-shaped when adverse. For return on profit, the association resembling an
inverse U when DC is supportive, and a U when adverse. These results are depicted in Figure 4 and
provide partial support for Hypothesis 6.
DOI: 10.1002/job
Discussion
We found that DC shapes the impact of relational demography across demographic lines, and that it
moderates the effects of organizational demography on firm effectiveness. At the individual level,
Hispanics were more likely to quit when the proportion of ethnically dissimilar others in the unit was
high and DC was adverse, but this did not occur when DC was supportive. African-Americans were
more likely to identify and commit to their organizations than other groups when DC was supportive,
regardless of proportions. Moreover, the proportion of dissimilar others in gender was positively related
to intention to quit, but not under a supportive DC.
At the organizational level, the results show that race/ethnic heterogeneity was associated with lower
return on income and productivity under an adverse DC, but that this association was positive under a
supportive DC. We also found a curvilinear association between GH and performance moderated by
DC. We should note that under a supportive DC, the association between GH and both performance
variables was inverse-U shaped, not the predicted linear association. Productivity was always higher
under a supportive DC. On the other hand, the nature of the curve for return on profit suggests that
moderate levels of GH result in the highest financial performance when DC is supportive, but the lowest
when DC is adverse. Given that the lines cross, this may indicate a backlash against efforts to enhance
DC when the firm is already highly diverse. This should be understood in light that, unlike race/
ethnicity, gender is not multidimensional.
Our approach is consistent with recent arguments that highlight the importance of context in the
study of organizational phenomena (e.g., Rosseau & Fried, 2001). We conducted this study with the
idea that a contextual factor, DC, would mitigate the (otherwise adverse) impact of diversity.
Interestingly, we found only weak evidence for several problems previously associated with diversity.
Consistent with prior research, we found that men in the minority were less attached to their
organizations, but we did not find such effects for women in the minority or for those dissimilar in terms
of race/ethnicity in general. In addition, men in the minority were not more likely to intend to turnover.
Also, our results corroborate studies that have delved into the association between firm diversity and
performance and suggest that it is mixed, complex, and subject to work setting constraints and
circumstances such as time and culture (Earley & Mosakowski, 2000) or strategic predisposition
(Richard, 2000; Richard et al., 2004).
Our results should be understood in light of some caveats, which also highlight the role of context.
We conducted this study in an organization where female employees outnumbered male employees,
and where whites barely outnumbered non-whites. In fact, we had noted that the two studies we could
identify that did present diverse samples (Chatman & O'Reilly, 2004; Riordan & Shore, 1997) did not
report adverse diversity effects. Chatman and O'Reilly (2004) found results that contradicted their
predictions relative to the ties that bind members to more gender-homogeneous groups, and also found
significant differences in the manner men and women reacted to diversity. Riordan and Shore (1997)
studied diversity in an organization with a high percentage of female members and found no effects for
gender diversity, but did report effects for racial diversity. Combined with our results, this may suggest
that both DC and organizational diversity per se may lead to the dynamics that preclude adverse effects.
The majority of people of color in the organization we studied were Hispanic, which suggests some
interpretations for our results. Demographic categories were not significantly correlated with the
outcome variables, but being African-American was positively related to commitment and negatively
related to intention to quit when demographic dissimilarity was controlled. Unlike Hispanics,
African-Americans likely were an organizational minority in most circumstances, and DC may have
influenced their attachment regardless of proportions. This could be a product of the region where the
organization studied is from, where Hispanics outnumber African-Americans. These results are
DOI: 10.1002/job
interesting given that Hispanics are now the largest societal minority in the U.S.A., and in light of other
demography studies that have compared whites with only African-Americans or with people of color as
a group.
We should also note that our sample was drawn from a single organization in a non-professional
industry. Our results must be compared with future studies that explore the role of DC in other settings
to explore their generalizability. We, however, stress the importance of blue-collar settings. Despite a
high degree of minority presence, these settings are not popular in diversity research, which often favor
professional settings (e.g., Ely, 1994; Ely & Thomas, 2001). Given the reality of this society, these
industries have a higher the number of people belonging to disadvantaged demographic groups and
lower resources for diversity management and training. In addition, we must mention that our
restaurant setting is characterized by simple jobs and high turnover, although the nature of the
restaurants implies greater interaction among people. Also, Sacco and Schmitt (2005) suggested that
individual differences have a lower effect on performance in this industry, but that the association
between diversity and performance may be stronger in a less constrained context.
We should also discuss other limitations. This was a cross-sectional design study in nature, which
prevented us from studying time dependent effects important for diversity and turnover (Harrison et al.,
2002; Tsui et al., 1992). Also, we were forced to use intention to quit that, while recognized as the most
immediate antecedent to turnover (Mobley et al., 1979), still lacks the objective characteristics of an
actual turnover measure. In addition, the low response rate may present some issues with non-response
bias if people who perceived a more adverse climate were more likely to respond. However, comparing
the demographic composition of our sample (including age) with the population showed a close match.
Also, the size of the sample called for cross-level regression, which does provide error term estimates as
accurate as HLM. Nonetheless, the results of an additional HLM analysis conducted provided very
similar results.
The aggregated DC measure presented low variance across organizations, although its psychometric
properties indicated that exploration at the work unit level was warranted. However, we believe that
DCs may often not be strong. Demography itself may influence the manner people perceive different
climate factors, and organizational characteristics may shape the extent to which perceptions are
shared. This is a subject of inquiry itself (Schulte et al., 2006). Scholars should study the causes and
consequences of strong DCs including how people with different backgrounds come to share a common
understanding through communication, social integration, informal ties, or empathy.
Despite these caveats and shortcomings, the implications of our conclusions from this study are
interesting and important. First of all, DC matters. The promotion of a supportive DC may reduce
possible adverse diversity effects. Also, categorical and relational demography effects are tied to
organizational demography, and thus their effects cannot be understood without reference an
organization's demographic composition. Finally, the complex association between organizational
diversity and performance depends on a variety of contextual factors such as strategy, industry
characteristics, and DC.
This may indicate a much less pervasive impact of relational demography than typically suggested
and provide optimism for organizations that wish to increase diversity but maintain high attachment. If
this pattern of results were to hold up, it would mean that there were essentially no negative effects for
diversity if the firm worked to be truly diverse in both numbers and the context that that support it, being
a supportive climate, culture, or perspective. This corroborates the argument that relational
demography problems dissipate as high diversity prevents fragmentation and tokenism problems
(Earley and Mosakowski, 2000; Kanter, 1977).
Such a conclusion requires additional studies in a variety of settings. Scholar should study
proportions and DC across different degrees of organizational diversity and different demographic
attributes. Scholars have already studied individualism and collectivism (Chatman & Spataro, 2005)
DOI: 10.1002/job
and organizational perspectives on diversity (Ely & Thomas, 2001). We need to study other contextual
circumstances such as silence and cynicism directed toward diversity initiatives. Scholars should also
note that it is important to further explore the association between DC and organizational diversity
itself, including how climates are perceived and managed. Given the purported adverse effects, we
cannot conclude that new insight and viewpoints associated with diversity invariably promote a
supportive climate.
For managers, the results imply that shared perceptions of justice can be managed to obtain
beneficial outcomes. It is important for them to understand how employees experience human resource
decisions such as recruitment, selection, retention, compensation, and promotion. As organizations
become diverse through proactive management or as a reaction to changing demographics, these
decisions can harm or promote performance directly or through their implications for fairness and DC.
Work organizations are a vehicle in which people from different social groups come in contact with one
another, develop their beliefs about other social groups and their own, and create a reality in which they
experience diversity. Thus, organizations become responsible for the quality of intergroup relations in a
society.
Author biographies
Jorge A. Gonzalez is an Assistant Professor of Organizational Behavior and Leadership at the

University of San Francisco. He received his Ph.D. in Management from Texas A&M University. His
current research focuses on workforce diversity, commitment and identification, and cross-cultural
management. He teaches courses in Organizational Behavior, Organizational Communication, Leader
ship, and International Management.
Angelo DeNisi is Dean of the A.B. Freeman School of Business at Tulane University. His research has
been published in a number of top journals in our field, and has been recognized with awards from the
OB and OCIS Divisions of the Academy, The Academy of Management Executive, and SIOP. He
serves, or has served on a number of Editorial Boards, including AMJ, AMR, JAP, Journal of
Management, and Journal of Organizational Behavior, and he served as Editor of the Academy of
Management Journal. He is Fellow of the Academy of Management, and he is the Vice-President and
Program Chair for the Academy. He is also a Fellow of the Southern Management Association, SIOP
and the American Psychological Association, and he served as President of SIOP.
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Cross-Level Effects of Demography and Diversity Climate on Organizational Attachment

and Firm Effectiveness

Cross-level effects of demography

JORGE A. GONZALEZ1* AND ANGELO S. DENISI2

Received 6 November 2006

Diversity and the Theoretical Models behind its Study

?I? Organizational Attachment

Organizational Demography Firm Effectiveness

Figure 1. Theoretical model

The Effects of Demography on Individual Attachment

Hypothesis 2: Categorical demography will be related to affective organizational commitment,

Being different and attached

Organizational-level demography effects

Potential contextual moderators

Individual organizational attachment

Firm unit performance

Table 1. Means, standard deviations, and correlations for individual-level outcomes

Variables Mean SD 123456789 10

Copyright ? 2007 John Wiley & Sons, Ltd. J. O

Table 3. Means, standard deviations, and correlations for organizational demography

Size 51.96 14.50

We examined the effects of demographic heterogeneity moderated by DC on firm performance

Table 4. Results of cross-level regression analysis for organizational demography

Productivity Return on income Return on profit

Note: Results are unstandardized regression coefficients

Jorge A. Gonzalez is an Assistant Professor of Organizational Behavior and Leadership at the

Byrne, D. (1971). The attraction paradigm. New York: Academic Press.

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