The Power of Diversification: Workforce, Supplier and Revenue Impacts on Firm Success

Author's Department

Economics Department

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https://doi.org/10.1111/issj.12597

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Mina Sami

Document Type

Research Article

Publication Title

International Social Science Journal

Publication Date

1-1-2025

doi

10.1111/issj.12597

Abstract

This study examines the effect of diversification in workforce, supplier networks and revenue sources on firms’ financial and non-financial performance. On the basis of the latest Economic Census that covers Egyptian firms, the author constructed diversity indices based on Blau and Entropy frameworks at the firm level. To address endogeneity and omitted variable bias, an instrumental variable approach with historical instruments was employed. The findings show that diversity indices (Blau and Entropy) significantly affect firm performance, with workforce diversity (education and occupation), supplier network diversity (local and international resources) and revenue sources (local and international distribution) being key drivers. The study also shows three important mediating factors. In particular, firms with workers from different backgrounds experience better performance through higher innovation and value creation. Similarly, firms with diverse suppliers experience higher performance by accessing better quality production capabilities and support services. Finally, firms that have diverse revenue sources have lower business risks, which positively affect their performance. The findings are robust across alternative constructions of diversification indices and performance measures.

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