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Abstract

This study explores the relationship between workplace diversity and employee innovation in Ghana’s banking sector, focusing on the mediating role of psychological safety. Workplace diversity, encompassing varied demographics and professional backgrounds, is often associated with enhanced problem-solving and innovation. However, these benefits are contingent on an environment that fosters psychological safety, defined as a shared belief that team members can express ideas without fear of negative repercussions. Using an explanatory research design grounded in a positivist paradigm, this study employed quantitative methods and gathered data from 180 banking sector employees in Ghana. Through structural equation modeling (SEM), the results reveal that while workplace diversity does not directly predict employee innovation (β = 0.140, p = 0.160), it significantly influences psychological safety (β = 0.594, p < 0.001). In turn, psychological safety shows a strong positive impact on employee innovation (β = 0.460, p < 0.001), confirming its role as a mediator. Mediation analysis further demonstrates a significant indirect effect of diversity on innovation through psychological safety (β = 0.274, p < 0.001). These findings suggest that diversity alone is insufficient to drive innovation unless supported by a psychologically safe work environment where employees feel empowered to share diverse perspectives. This study contributes to diversity management literature by positioning psychological safety as a crucial mediator that enables organizations to fully leverage the benefits of diversity for innovation. For practitioners, particularly within the regulated banking industry, the findings emphasize the importance of embedding psychological safety in diversity initiatives to unlock diverse teams' potential for innovation. The study provides a foundation for future research on additional factors that may shape the diversity-innovation link, ultimately recommending that organizations create inclusive climates to support sustainable, innovation-driven outcomes.

Keywords

Workplace diversity Employee innovation Psychological safety Banking sector Mediation analysis

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This work is licensed under a Creative Commons Attribution 4.0 International License.

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