As noted, the term “diversity” has taken on an expanded meaning with widely recognized importance, particularly since a large number of stud?ies have revealed its positive relationship with innovation (Bassett-Jones, 2005; O’Reilly, Williams, & Barsade, 1998; 0stergaard, Timmermans, & Kristinsson, 2011). In addition, innovation is broadly deemed as an integral component of a firm’s competitiveness (Bassett-Jones, 2005; Gun day, Ulusoy, Kilic, & Alpkan, 2011). With growing attention on diversity, many studies now include sexual orientation as a diversity attribute (Harvey & Allard, 2002; McNulty, 2015; Ragins et al., 2003; Rumens & Broomfield, 2012 ; Rumens & Kerfoot, 2009), despite the fact that few explicitly empirically investigate the phenomenon, particularly as it relates to talent.
There are many different ways that diversity might be classified, however, it is usually divided into visible diversity and invisible diversity based on different attributes (Barak & Levin, 2002; Jackson, May, & Whitney, 1995). Visible diversity; such as race and gender, refers to characteristics that are more external and observable and that are different from the majority of others in the organization or social network, whereas invisible diversity refers to those differences that are not readily seen (Barak, 1999) by even those in the same culture. In this regard, sexual orientation is one of the invisible attributes of diversity (Ozbilgin & Woodward, 2004). Due to its nature, visible diversity involves more overt and direct discrimination, while invisible diversity involves subtle and covert forms of discrimination (Bell et al., 2011). To wit, Ragins and Cornwell (2001) found that LGBT employees indirectly experience discrimination through the existence of a hostile work environment directed toward them. As a result, MNEs may not see such invisible sexual orientation discrimination as a problem because it is invisible. What makes matters worse is that LGBT employees often remain silent, or are forced to be quiet for fear of being thought of as abnormal in their MNEs (Bell et al., 2011). Supporting this point of view, Bowen and Blackmon (2003) noted that fear of discrimination appears stronger for those with invisible diversity attributes.
Levine and Leonard (1984) identified formal and informal discrimination against LGBT employees. Formal discrimination includes disadvantages for employment, promotions, rewards, and even firing. On the other hand, informal discrimination includes lack of trust, acceptance, and respect either by coworkers or by supervisors, which can have equally negative employment outcomes.
Sexual orientation discrimination at work has a substantially detrimental effect both on LGBT employees and MNEs. Not only actual discrimination, but also perceived discrimination, can create negative work outcomes. Ragins and Cornwell (2001) found that perceived sexual orientation discrimination in the workplace is negatively related to job attitudes and job satisfaction. Consequently, knowing and understanding its antecedents and what can be done by the MNE about sexual orientation discrimination is important for MNEs wishing to retain their human capital regardless of sexual orientation.
Despite the fact that same sex marriage has become legal in all 50 states in the USA and other countries, there has been a growing worldwide effort to prevent sexual orientation discrimination in the workplace, LGBTs are often overlooked in business practices as well as in IAs. LGBT expatriates carry a stigma related to their invisible diversity (McNulty, 2015) and oftentimes face institutional discrimination within a dominant heterosexual organizational culture, exacerbated by a homophobic host country environment. We now turn to theoretical backdrops against which we discuss diverse human capital and innovation.