Exploring the Mediating Role of Integrated Innovation on the Nexus Between Diversity Management and Firm Competitiveness in Selected Industries in Adama City, Oromia Region, Ethiopia

There is limited empirical evidence and no current studies are available in database sources regarding diversity management and integrated innovation, even though it is globally important. Most existing studies have focused on developed economies, thereby overlooking the unique challenges and opportunities that characterize emerging markets such as Ethiopia. Moreover, the mediating role of innovation in the relationship between diversity management and firm competitiveness has not been sufficiently investigated, leaving a critical aspect of this relationship unexplored. This research aims to examine the effects of diversity management on firm competitiveness and assess the mediating role of integrated innovation within selected industries in Adama City, Oromia Region, Ethiopia. To achieve methodological triangulation in analysis, both the PROCESS macro for SPSS and Structural Equation Modelling (SEM) are employed. Differences in the magnitude of mediation effects between PROCESS Macro and SEM mainly occur because the two methods use different estimation approaches and handle measurement error differently. As a result, variations in mediation strength, significance, and path coefficients are expected. Mediation analysis confirmed a significant indirect effect of diversity management on competitiveness through integrated innovation. The direct effect also remained significant and weaker than the indirect effect, indicating partial mediation. Theoretically, the study reinforces innovation‐based and resource‐based views by demonstrating that diversity yields competitive benefits primarily when transformed into innovative outputs. Overall, diversity management improves firm competitiveness when supported by innovation and strong implementation. The study recommends strengthening the operationalization of diversity initiatives and conducting further research on additional mediators, contextual influences, and sectoral variations.