Dynamic capabilities for managing racially diverse workforces: Effects on competitive action variety and firm performance

In this study, we develop and test a model of dynamic capabilities for integrating, building, and reconfiguring racially diverse workforces through diversity-specific management routines, such as mentoring programs, formal network groups, internship-based recruiting practices, and succession planning for racial minorities. We find that diversity management routines (DMR) collectively enhance a firm's ability to compete with a wider range of competitive actions, which in turn increases financial performance. We also find that the indirect effect of diversity management routines on company performance is conditional on the presence of diversity cognition routines (DCR). Firms fail to benefit from diversity management routines when they do not incorporate diversity cognition practices. Our moderated mediation model contributes to a better understanding of how companies can manage racially diverse human resources (HR) to increase competitive action variety and improve firm performance.