Diversity and Performance in the Multinational Firm: Evidence from the Ships of the Dutch East India Company, 1700-1796

The global organization is routinely confronted with the problem of managing groups composed of diverse nationalities. These problems were amplified during early capitalism, when language and religious differences created sharp divisions among workers. Empirical analyses that draw on historical evidence of the causal relationship between national diversity and subunit performance nevertheless remain rare. We deploy social categorization and similarity-attraction theories to suggest how national diversity may have affected conflict and turnover among the members of multinational teams in early capitalism. In addition, we consider workforce recruitment as an alternative mechanism that suggests a confounding of the effects of national diversity with a lack of firm-specific experience. We test our hypotheses on instances of individual punishment and desertion among roughly half a million seafarers of the Dutch East India Company (VOC) and on the time to completion of more than two thousand voyages to Asia by VOC ships. Our results suggest that much of the adverse performance "effect" of multinational diversity could be explained by historical shifts in workforce recruitment, rather than by a causal impact of conflict and turnover. More generally, the study has implications for the analysis of diversity in historical contexts, when demographic heterogeneity did not yet have implications for the external legitimacy of firms.