Cultural Diversity and Team Performance

One of the most salient and relevant dimensions of team heterogeneity is cultural background. We measure the impact of cultural diversity on the performance of business teams using a field experiment. Companies are set up by teams of undergraduate students in business studies in realistic though similar circumstances. We vary the cultural composition of otherwise randomly composed teams in a multi-cultural student population. Our data indicate that a moderate level of cultural diversity has no effect on team performance in terms of business outcomes (sales, profits and profits per share). However, if at least the majority of team members is culturally diverse then more cultural diversity seems to affect the performance of teams positively. Our data suggest that this might be related to the more diverse pool of relevant knowledge
facilitating (mutual) learning within culturally diverse teams.