Can Social Capital Unlock Diversity? Examining How External Relations Enhance Task-related Diversity

The benefits of task-related diversity on team performance are both intuitive and theoretically justified, but empirical work reveals only a weakly positive relation. Much of the extant literature focuses on how diversity affects the internal functioning of the team and the presumed contextual moderators tend to focus on task-related and situational characteristics. But teams are not isolated units. We advance the notion that the theorized benefits of task-related diversity are not fully realizable in and of themselves, but rather are contingent on the social-relational context in which teams are embedded. In this study, we integrate team diversity and social-capital research to theorize that task-related diversity within teams can be “unlocked” by external social capital, that is, by the structure of relations a team has throughout the broader organization and the resources embedded in those relations. Using data from 36,488 analyst reports by a leading brokerage house from 2011 to 2019, we find that obtaining heterogeneous external social capital amplifies the positive relationship between team task-related diversity and forecast accuracy. We further establish structural boundary conditions around this moderation effect, whereby the benefits of heterogeneous social capital diminish as the number and strength of a team’s external relations increase.