Effects of diversity management and integrated innovation on the competitiveness of Ethiopian industries and their relationships with demographic diversity: a structural equation modeling approach

In contemporary dynamic and globalized business environment, industrial competitiveness has become one of the most crucial concepts. However, there has been insufficient information on the effect of integrated innovation and diversity management on the competitiveness of firms and their relations with demographic diversity in developing countries like Ethiopia. Almost all the previous studies have focused on the outcomes of demographic diversity without much consideration for the roles of integrated innovation and diversity management as two strategies complementing each other in improving competitiveness. This research examines the effects of diversity management and integrated innovation on firm competitiveness and their relations with demographic diversity in selected industries in Adama City, Ethiopia. Descriptive and correlation research designs were applied in this quantitative study. Data from 262 employees sampled by stratified random sampling technique were analyzed using SEM by means of AMOS. The results have shown that demographic diversity variables were not significantly correlated with both diversity management and integrated innovation. Contrarily, integrated innovation had made a considerably strong positive effect on firm competitiveness ( β = 0.757, p < 0.001) compared to diversity management ( β = 0.190, p = 0.006). Furthermore, diversity management showed a strong positive correlation with integrated innovation ( r = 0.858). Therefore, organizations which manage diversity well can implement integrated innovation successfully. In conclusion, it is found that strategically managed diversity and integrated innovation are complementary capabilities for firms to achieve competitiveness. On the other hand, demographic diversity cannot offer any competitive advantage to firms without being translated into strategic organizational practices. This research makes an important contribution to the literature because it differentiates demographic diversity from diversity management and their role in organizational competitiveness. Managers are advised to integrate diversity management in their organizational practices along with prioritizing integrated innovation. In order to promote sustainable industrial competitiveness in Ethiopia, policy-makers should enhance innovation ecosystems and institutional framework.