The impact of R&D workforce diversity on firm’s performance in internal and external R&D

Purpose: How should managers organize their R&D workforce in order to maximize the benefit of internal R&D and R&D outsourcing strategy? The purpose of this paper is to examine the effects of R&D workforce diversity on firms’ performance when the firms use internal and external knowledge acquired from R&D outsourcing. Diversity of R&D employees as R&D workforce can enable firms to utilize the knowledge of internal R&D and internalize the external knowledge. Design/methodology/approach: Panel data analysis with fixed effects is used. The authors conduct hierarchical multiple regression analyses to test the moderating effect of R&D workforce diversity with 10,401 data from Korean manufacturing firms. Findings: This study finds out that age and education diversity of R&D workforce have positive moderating effects on the relationship between the R&D outsourcing and firm performance. In contrast, internal R&D is negatively associated with firm performance when the age diversity of R&D workforce increases. The results point to the significant role of R&D workforce diversity in R&D unit since firms often use both internal R&D and external R&D. Practical implications: For practical implications to be more effective, CEOs and managers of firms should employ differentiated approaches to manage the diversity of R&D workforce based on whether they primarily focus on their internal R&D or utilize external R&D. Originality/value: This research extends recent efforts to better understand the effect of organizational diversity on the firms’ performance when firms use internal R&D and R&D outsourcing strategy.