Letian Zhang

Harvard Business School

Originally published 23 Jan20

Abstract

This paper develops a theory of how disruptive events shape organizational inequality.  Despite various organizational efforts, racial and gender inequality in the workplace remains high. I theorize that because the persistence of such inequality is reinforced by organizational structures and practices, disruptive events that shake up old hierarchies and break down routines and culture should give racial minority and women workers more opportunities to advance. To examine this theory, I explore a critical but seldom analyzed organizational event in the inequality literature – mergers and acquisitions. I propose that post-acquisition restructuring could offer an opportunity for firms to advance diversity initiatives and to objectively re-evaluate workers. Using a difference-in-differences design on a nationally representative sample covering 37,343 acquisitions from 1971 to 2015, I find that although acquisitions lead to occupational reconfiguration that favors higher-skilled workers, they also reduce racial and gender inequality. In particular, I find improved managerial representation of racial minorities and women and reduced racial and gender segregation in the acquired workplace. This post-acquisition effect is stronger when (a) the acquiring firm values race and gender equality more and (b) the acquired workplace had higher racial and gender inequality.  These findings suggest that disruptive events could produce an unintended consequence of increasing racial and gender equality in the workplace.

Managerial Implications

From a managerial perspective, disruptive events offer an opportunity to advance diversity or equality-related goals that might be difficult to pursue during normal times.  As my analyses show, acquisition amplifies the race and gender differences between those acquiring firms that value diversity and those that do not. For managers concerned about race and gender issues, acquisitions and other disruptive events might serve as suitable moments to improve race and gender gaps effectively and at a relatively lower cost. Thus, despite the disruption and uncertainty during these periods, managers should see disruptive events as prime opportunities to make positive changes.