Women In Management And Firm Financial Performance: An Exploratory Study

Modern business is clearly conducted in uncertain contexts. Today's firms are faced with ever increasing international competitive pressures, unstable capricious markets, new and complex technologies, and with dramatic changes in society in general. Paramount among these changing contexts is the change in the management composition of firms due to women assuming management positions. The American work force is one of the most ethnically and gender diverse in the world (Cox and Smolinski, 1994). For firms, this diversity affords new opportunities and challenges. According to Nichols (1993), in this decade, women managers will redefine managerial work and will provide firms with opportunities to capitalize on the challenging contexts they face. Zellner (1994) further notes that women are starting new businesses at a rate nearly twice that of men, and are "bringing to the table" skills such as team building and employee development that are very much in tune with today's competitive realities. Our goal in this study is to provide conceptual arguments and empirically explore the firm-level relationships of women in management with financial performance outcomes. To this date, few studies have been directly concerned with firm-level financial performance issues. We will justify and build on the assumption that firms employing more women managers have probably done a better job of recruiting capable managers from the total available talent pool, and consequently will be in a better position to link with customers, employees, and other constituencies. Firms employing higher percentages of women are likely to perform better inasmuch as they are more progressive and more competitive because their management contingents more closely mirror the composition of existing markets. EXPLANATORY FRAMEWORK Rationale for these arguments is found in the "resource-based" theory of competitive advantage and strategy analysis (e.g., Barney, 1991, 1997; Grant, 1991). Basically, according to Barney (1997), resource-based theory argues that it is not industry structure that leads to competitive advantage and better performance. Rather, it is the ability to capitalize on and apply the firm's internal resources in uncertain and dynamic industry contexts. The theory proposes that firms are defined as sets or "bundles" of resources. Firms can develop strong competitive advantages by accumulating unique or difficult to duplicate bundles of resources, and these resources can allow firms to take advantage of environmental opportunities or counterbalance threats. Supportive of the theory, research by Robins and Wiersema (1995) indicated that the ability to build these advantages paid off in terms of return on investment. Barney goes on to say that human capital resources are key to competitive advantage. Employee and management capabilities are firm-level resources that are among the most sustainable and difficult for competitors to imitate. The notion of human resources being the key to competitive advantage is prominent in the current popular management literature. For example, writing of their collective experience with numerous company change efforts, Katzenbach et al. (1995) concluded that many firms have underutilized human resources in this modern era of international competition and organization change. The underutilized resources tend to include females and those of diverse racial and ethnic backgrounds who might otherwise bring different perspectives to the firm. By better utilizing the contributions of women and minorities, firms can become more creative and accepting of change. Katzenbach et al. contend that if fully tapped, it is this cadre of middle-level, diverse, change-oriented managers that sets the high performing firms apart from the others. Iles and Auluck (1993) found that diverse work forces were beneficial to firms because they facilitated team problem solving and synergy. The ability to manage diversity fostered the incorporation of various perspectives into organizational decision making, and firms that united a wider range of participants performed well. …