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Keywords:

  • D2;
  • J1;
  • J2;
  • J3;
  • J8;
  • L2;
  • M5

This study explores the consequences of grouping workers into diverse divisions on the performance of employees using a dataset containing the detailed personnel records of a large U.S. firm from 1989 to 1994. In particular, I examine the effects of demographic dissimilarity among co-workers, namely differences in age, gender, and race among employees who work together within divisions, and non-demographic dissimilarity, namely differences in education, work function, firm tenure, division tenure, performance, and wages among employees within divisions. I find evidence that age dissimilarity, dissimilarity in firm tenure, and performance dissimilarity are associated with lower worker performance, while wage differences are associated with higher worker performance. My analysis also reveals that the effects of certain types of dissimilarities get smaller in magnitude the longer a worker is a part of a division. Finally, the paper provides evidence that the relationships between performance and the various measures of dissimilarity vary by occupational area and division size.