Why diversity climate alone does not drive innovation in healthcare: evidence from an emerging economy

PURPOSE: This study examines why diversity climate may fail to stimulate innovation in healthcare organizations operating in an emerging economy and identifies the organizational capabilities that convert internal resources into performance outcomes. DESIGN/METHODOLOGY/APPROACH: Survey data were collected from 311 managers in Vietnamese hospitals and pharmaceutical firms. Partial least squares structural equation modelling was used to assess reliability, validity, direct effects, predictive relevance and mediation through firm innovativeness. FINDINGS: R and D effectiveness positively predicts both firm innovativeness and firm performance. Diversity climate improves firm performance directly but does not significantly predict innovativeness. Participative leadership does not show a significant direct association with either firm performance or innovativeness in the reported structural model. Firm innovativeness positively predicts firm performance. RESEARCH LIMITATIONS/IMPLICATIONS: Cross-sectional and self-reported data limit causal claims. Future research should use longitudinal designs and objective performance indicators. PRACTICAL IMPLICATIONS: Healthcare managers should complement diversity initiatives with interdisciplinary work routines, R and D partnerships, psychological safety practices and innovation governance systems. SOCIAL IMPLICATIONS: The findings extend resource-based and dynamic capability perspectives by specifying an emerging-market healthcare boundary condition: inclusive climates do not automatically become innovation capability when professional silos, hierarchical norms and weak knowledge-integration mechanisms restrict voice and experimentation. ORIGINALITY/VALUE: The study challenges the universal assumption that diversity climate naturally drives innovation and shows that leadership, R and D systems and institutional context shape whether inclusion becomes innovation.