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Why do firms fail to engage diversity? A behavioral strategy perspective

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Liu, Chengwei (2021) Why do firms fail to engage diversity? A behavioral strategy perspective. Organization Science, 32 (5). pp. 1193-1209. doi:10.1287/orsc.2020.1425

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Official URL: https://doi.org/10.1287/orsc.2020.1425

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Abstract

The persistent failure of organizations to engage diversity—to employ a diverse workforce and fully realize its potential—is puzzling, as it creates labor-market inefficiencies and untapped opportunities. Addressing this puzzle from a behavioral strategy as arbitrage perspective, this paper argues that attractive opportunities tend to be protected by strong behavioral and social limits to arbitrage. I outline four limits—cognizing, searching, reconfiguring, and legitimizing (CSRL)—that deter firms from sensing, seizing, integrating, and justifying valuable diversity. The case of Moneyball is used to illustrate how these CSRL limits prevented mispriced human resources from being arbitraged away sooner, with implications for engaging cognitive diversity that go beyond sports. This perspective describes why behavioral failures as arbitrage opportunities can persist and prescribes strategists, as contrarian theorists, a framework for formulating relevant behavioral and social problems to solve in order to search for and exploit these untapped opportunities.

Item Type: Journal Article
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HM Sociology
Divisions: Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Diversity in the workplace , Multiculturalism , Personnel management
Journal or Publication Title: Organization Science
Publisher: Institute for Operations Research and the Management Sciences (I N F O R M S)
ISSN: 1047-7039
Official Date: September 2021
Dates:
DateEvent
September 2021Published
19 February 2021Available
8 October 2020Accepted
Volume: 32
Number: 5
Page Range: pp. 1193-1209
DOI: 10.1287/orsc.2020.1425
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Open Access
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