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The Impact of National Context and Leadership Cultural Value Communication on Diversity and Inclusivity in Business Organizations

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Abstract

This paper proposes a new framework of Leadership as a Medium of Corporate Social Identity (LeaM-CSI) linking cultural values at a state level with corporate diversity and inclusivity. In this framework, leadership, through communication of cultural values, increases the salience of these values at a corporate level, increasing the corporate social responsibility, especially in the domain of promoting diversity and inclusivity. The proposed framework is tested using a combination of a natural experiment, machine learning and econometric analysis. Focusing on companies leading on diversity and inclusivity for the years 2018 and 2019, we first identify cultural values important for diversity and inclusivity and find that corporate leaders in diversity and inclusivity tend to have headquarters in states where egalitarianism is an important value orientation. Furthermore, the topic recognition exercise conducted using these companies' mission statements revealed that many of the leading diversity and inclusion companies focus on public good provision egalitarianism salience rather than "diversity" or "inclusivity" salience. We then compare the annual CEO statements of top 100 companies with diverse and inclusive social identities between 2018 and 2019 and, using the supervised topic recognition exercise fueled by machine learning, establish how the change in translated values affect the companies' standing in the diversity and inclusivity ranking. Increase in the salience of egalitarianism and public good provision egalitarianism values is associated with the higher propensity to become a global corporate diversity and inclusivity business leader.

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The belief in the importance and viability of the new organizational form serves as a loose ideology for controlling and coordinating the actions of participants.GROWTH INDUSTRY ORGANIZING: BANDWAGONSBandwagons are organizing processes that seek to exploit the potential of a newly legitimated form. The strategic challenge at this stage is to prosper newly legitimated form. The strategic challenge at this stage is to prospeamidst rapid growth and change. The successful entrepreneur has an extensive network of high status individuals that can be tapped to quickly mobilize resources within a narrow window of opportunity. Stakeholders are motivated less by social factors, than by a desire to secure the benefits of being early movers. Formal confidence-building mechanisms dominate. In an effort to achieve efficiencies, develop sources of competitive advantage, and preempt the competition, more value-chain activities are developed in house. The strategic posture remains entrepreneurial; however, more emphasis is placed on following the example of other firms.MATURE INDUSTRY ORGANIZING: CLONESClones are the organizing processes that replicate existing forms and incorporate all that has been learned about a given industry and type of business. Strong competition along with stable demand and technology make it difficult to find a source of competitive advantage in a mature industry. At this stage, the successful founder is someone with extensive industry knowledge and contacts who is capable of extracting operating efficiencies and/or identifying some underserved market segment. Expected returns are modest and stakeholders need to be motivated partly by social factors. However, the large amount of information now available about the form and the market itserves enables stakeholders to base their participation decisions on a rational assessment of expected future benefits. Given increased experience with the form, the relationships between the organization and its stakeholders are more predictable and as a consequence, subject to greater formalization. Models exist showing how to structure theserelationships, facilitating greater use of more specific contracts and guarantees. With tight margins and the need for efficiency, greater use is made of hierarchy in an attempt to manage costs. These same highly competitive conditions also make mistakes very expensive. The organization needs to draw upon the knowledge that others have learned about the form. Consequently, it adopts a more conservative strategic posture and is less likely to deviate from established practice.IMPLICATIONS FOR FUTURE RESEARCHIf we are ever to understand what leads to entrepreneurial success, we must pay more attention to the context in which organizing occurs. Our typology suggests that fundamentally different processes may be at work at different stages of industry evolution. In addition to empirically testing our theory, an opportunity exists to reexamine the existing entrepreneurship literature through a new conceptual lens, asking how our interpretation of the research would differ if context was considered explicitly. Our theory also has the potential to inform questions about the role of organizational foundings in the diffusion of competitive advantage and to examine the impact of.founding conditions on long-term strategic adaptation.
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