The XX factor of innovation: Women managers

Corporations have long sought the elusive X factor: that one variable capable of ensuring a competitive advantage. Is it innovation? Flexibility? A dynamic leader? Research shows that firms might just benefit from the XX factor — the two X chromosomes representing female cells.

Women leaders, it turns out, may provide an advantage when it comes to innovation, a main driver of economic growth. Studies report that women leaders are often nurturing, people-oriented, and flexible. With less hierarchical and more participatory leadership styles, women managers encourage input from diverse perspectives. Inclusivity, communication, and knowledge-sharing are hallmarks. The result: more trust, more ideas, more information, and a fertile ground for innovation. Innovation, of course, leads to new products, which can lead to profitability.

A global study

“A lot of previous research shows a positive relationship between women managers and innovation, but all have been conducted in single-nation settings,” says Peggy Lee, associate professor of management and entrepreneurship. Along with a team of global researchers, she studied innovation by women in an international context.

In their paper, The XX Factor: Female Managers and Innovation in a Cross-Country Setting, the team analyzed global data from nearly 2,000 manufacturing firms in 12 countries, based on a survey conducted by the World Bank and European Bank for Reconstruction and Development. Lee’s collaborators included Nicolai Foss of Copenhagen Business School in Denmark, Samuele Murtinu of the Netherlands’ Utrecht University, and Vittoria Scalera of the University of Amsterdam Business School.

“Our research shows the link between women and innovation is positive across all countries,” says Lee. “We discovered that, on average, the presence of one woman manager is positively associated with the likelihood of introducing new products or services byproducts; the average marginal effect is +10.14%.”

Gender-quota considerations

The study aimed at understanding the innovation X factor as it relates to gender-quota hiring practices. Does the way a woman is hired impact her innovation? The short answer is yes.

Some parliaments — and company boards — mandate hiring quotas for women, while others only require reporting on the representation of women. Either way, clear messages are sent to the private sector that gender equality should be the prevailing norm. The stronger the signal from the government, the more “forced” the firm’s hiring behavior appears as it feels compelled to follow suit.

These mandated quotas do provide overlooked women talent with management opportunities. But, under forced selection, another problem can arise. “Once quotas are mandated, there may not be enough women in the applicant pool who are qualified,” says Lee.

This may be the case with forced-quota board appointments, where the entry of women to the leadership team can negatively impact short-run profits. Alternatively, as some studies explain, the decreased profits could result from a behavioral response. When organizational identity is challenged — in this case, an all-male-manager culture — reduced cooperation and assistance between the newly appointed woman managers and other male managers may occur.

Another real issue in both board- and private-sector quota hires is that candidates may face additional scrutiny from peers — even from women who have already “made it” to the top — limiting their ability to exert an innovative leadership style.

What happens when a more voluntary process without forced representation levels is applied? “In settings with suggested quotas,” says Lee, “the women who are promoted to managerial levels tend to be more than qualified.” That’s because, with this selection process, hiring is based on ability. Qualified women managers can more effectively leverage their leadership styles and positively impact innovation.