The Double-Edged Sword of Diversity: How Diversity, Conflict, and Psychological Safety Impact Agile Software Teams

Team diversity can be seen as a double-edged sword. It brings additional cognitive resources to teams at the risk of increased conflict. Few studies have investigated how different types of diversity impact Agile software teams. This study views diversity through the lens of the categorization-elaboration model (CEM). We investigated how diversity in gender, age, role, and cultural background impacts team effectiveness and conflict, and how these associations are moderated by psychological safety. Our sample consisted of 1,118 participants from 161 teams and was analyzed with Covariance-Based Structural Equation Modeling (CB-SEM). We found a positive effect of age diversity on team effectiveness and gender diversity on relational conflict. Psychological safety contributed directly to effective teamwork and less conflict but did not moderate the diversity-effectiveness link. While our results are consistent with the CEM theory for age and gender diversity, other types of diversity did not yield similar results. We discuss several reasons for this, including curvilinear effects, moderators such as task interdependence, or the presence of a diversity mindset. With this paper, we argue that a dichotomous nature of diversity is oversimplified. Indeed, it is a complex relationship where context plays a pivotal role. A deeper understanding of diversity through the lens of theories such as the CEM may lead to more effective teamwork.