Abstract
Distributed teams in organizations are ubiquitous, use digital technologies extensively, and have the potential to be innovative due to the level of diversity of their members, but they face many challenges. Demographic differences can often result in the activation of team faultlines (overlap of surface-level differences), leading to formation of subgroups and negative impacts on group outcomes. This study examines the relationships between faultlines and their outcomes to discover how certain team processes mitigate the negative effects of dormant faultlines on team outcomes in globally distributed teams. The analysis of a survey of 165 global team members representing 27 teams in a multinational high-tech organization demonstrated that psychologically safe communication climate (PSCC) and team identification moderated the relationship between faultlines and perceived subgroups. Specifically, in teams with low PSCC and identification, dormant faultlines predicted an increase in perception of subgroups. The findings also indicate that perceived subgroups moderate the relationship between dormant faultlines and team satisfaction. When subgroups are less perceived by team members, faultlines predict an increase in satisfaction.
Keywords
Although organizations have been increasingly employing teams to perform various tasks, researchers have been trying to theorize about the impact of such factors as team composition and geographic distribution on team processes and outcomes. Research on the effects of team diversity has been burgeoning. In addition to research on objective, surface-level diversity (e.g., Stahl, Maznevski, Voigt, & Jonsen, 2010), research on subjectively perceived diversity is growing (Shemla, Meyer, Greer, & Jehn, 2014). This study was inspired by the notion that team diversity becomes visible in the way people communicate and create subgroups and alliances in teams. The main goal was to discover how certain team processes mitigate the negative effects of dormant faultlines on team outcomes in globally distributed teams. Dormant faultlines represent the alignment of demographic differences (e.g., age, gender, or nationality) that reflect the potential of a team to fracture into subgroups (Lau & Murnighan, 1998). When faultlines are activated into perceived subgroups, they are more likely to have a significant impact on such outcomes as team innovation and satisfaction. Global teams capable of developing team processes such as identification (Scott, Corman, & Cheney, 1998) or psychologically safe communication climate (PSCC) (Gibson & Gibbs, 2006) may be more effective in overcoming challenges resulting from diversity and geographical distribution.
Global teams are particularly complex organizational structures because they are widely geographically distributed and culturally diverse (Gibson & Gibbs, 2006). These features have been found to affect team interaction and outcomes (e.g., Hinds, Liu, & Lyon, 2011; Stahl et al., 2010). Looking at subgroups in global teams is important because cultural diversity and geographical distribution create conditions in which team members communicate more often with some individuals than with others (Mäs, Flache, Takács, & Jehn, 2013), making them prone to us-versus-them attitudes across sites (Cramton, 2001; Polzer, Crisp, Jarvenpaa, & Kim, 2006).
Team diversity has been found to benefit decision-making, creativity, and innovation (Stahl et al., 2010), yet it poses challenges to teams due to fracturing of teams described as faultlines. The concept of faultlines has been gaining prominence in research on team diversity. Cramton and Hinds (2005) compared faultlines with “the earth’s crust: they describe the pathways along which a group would most likely split into subgroups and the vulnerability of the group to this occurrence” (p. 235). Faultlines refer to the overlap of demographic differences but reflect neither interactions among group members nor subjective perceptions (Bezrukova, Jehn, Zanutto, & Thatcher, 2009). They may or may not lead to subgroup formation (Gibbs, Sivunen, Boyraz, & Nordbäck, 2015). Examining both the perception of subgroups and processes alleviating the effects of faultlines is necessary for understanding the mechanisms and consequences of subgroups in global teams. Research on faultlines and subgroups is frequently conducted in the lab (e.g., Chiu & Staples, 2013; Yilmaz & Peña, 2014) and although this contribution is very important, subgroups should also be examined in field studies.
There are several gaps in research on subgroups in the global team context. For example, research on faultlines, starting with Lau and Murnighan’s (1998) work, has not paid much attention to team process. As a result, we have little knowledge of when faultlines will result in subgroups and how team communication might help them remain dormant (Cramton & Hinds, 2005). This major gap in team research has existed even though organizations are increasing their use of teams due to advances in communication technologies.
This study examines how the processes of team identification (Ashforth, Harrison, & Corley, 2008; Scott et al., 1998) and PSCC (Gibson & Gibbs, 2006) may alleviate the effects of dormant faultlines and decrease perceptions of subgroups. These team processes may ameliorate consequences (process losses as defined by Stahl et al., 2010) of faultlines. Global teams that can build these processes through interactions are likely to experience gains and less likely to experience challenges resulting from diversity and geographic dispersion. To investigate these relationships, this study draws on faultline and identification theory, as well as the concept of PSCC.
Distinction Between Team Diversity and Team Faultlines
Team diversity refers to differences among team members on such dimensions as surface-level attributes (such as nationality, gender, or age) or deep-level characteristics (underlying values and attitudes) (Stahl et al., 2010). Research findings on the impact of diversity on global teams are mixed. The traditional view of diversity has considered it as uni-categorical (Blau, 1977), taking one dimension of diversity at a time. The reason why faultlines have become such an appealing concept is that they appear to be the first construct in diversity research associated with a consistent main (negative) effect on team-level outcomes across contexts (Thatcher & Patel, 2012). The concept of diversity refers to differences, whereas faultlines refer to the overlap of the demographic characteristics and potential to split into subgroups (Lau & Murnighan, 1998). Lau and Murnighan prompted a debate on team diversity that has resulted in many scholars developing better measures of faultlines to more accurately predict such outcomes as team performance, creativity, or innovation (Meyer & Glenz, 2013). According to Lau and Murnighan, demographic differences that are not aligned are the best for team outcomes, but when they do align, the opportunities for faultlines to result in subgroups are greater. As a result, subgroups have negative consequences for team processes (e.g., conflict) and performance.
This article extends the research on faultlines to consider their effects as dynamic rather than static to illustrate the argument that global teams have agency over the dormant faultlines. The assumption of this study is that team diversity is socially constructed through communication. This approach departs from the more traditional view of diversity as uni-categorical (Blau, 1977). It is also worth noting, however, that although the role of communicative interactions underlies the assumptions of this study, it does not take the communicative constitution of organizations (CCO) approach (e.g., Cooren, 2015).
Team diversity has been found to be beneficial to creativity and innovation (De Dreu & West, 2001; Gibson & Gibbs, 2006; Kratzer, Leenders, & Van Engelen, 2006). However, many scholars have recently realized that team diversity does not affect outcomes directly but that how people form subgroups has a stronger impact on such outcomes as innovation or performance (Thatcher & Patel, 2011). According to Self-Categorization Theory (SCT) (Tajfel & Turner, 1979; Turner, 1987), self-categorization underlies team processes. Cramton and Hinds (2005) argue that subgrouping in virtual teams can activate ethnocentric assumptions toward one’s own subgroup and against the out-group. Geographic distribution may contribute to the “out of sight, out of mind” dynamic (Cramton, Orvis, & Wilson, 2007), generating negative attributions of remote team members. Cramton and colleagues found that distributed teammates were significantly more likely than collocated teammates to make dispositional attributions rather than situational attributions because of situational invisibility. These dispositional attributions that occur due to team members not being able to see what is going in other locations affect relational outcomes such as satisfaction and cohesion (Cramton et al., 2007).
Diversity Faultlines and Their Effects on Team Outcomes
Research on impacts of diversity on team processes and outcomes, including innovation and performance, is inconclusive. Meta-analyses do not provide clear results (Bell, Villado, Lukasik, Belau, & Briggs, 2011; Guillaume, Brodbeck, & Riketta, 2012; Stahl et al., 2010). According to some (Joshi & Roh, 2009; Kim, 2018; Meyer & Glenz, 2013), the effects of diversity on team processes seem to be context dependent, and there are several mediators and moderators. There seems to be no main effect of team diversity with regard to a specific type of diversity (e.g., gender diversity) on team outcomes. Faultlines appear to be the first construct in diversity research associated with a consistent negative effect on team-level outcomes such as performance, cohesion, or conflict across contexts (Thatcher & Patel, 2012). Faultline theory assumes that it is not diversity per se that affects team processes and outcomes but the alignment of potential subgroups within the team. It is interesting because dormant faultlines may not be perceived by team members (Thatcher & Patel, 2011, 2012). If they are perceived as subgroups, they are more salient for team processes and outcomes than dormant faultlines. This study looks at factors (team identification and PSCC) that alleviate the negative effects of faultlines within global teams, enabling teams to derive the benefits of team diversity.
Social Identity (SIT) and Self-Categorization Theory (SCT)
The SIT approach provides a theoretical framework for explaining the relationship between team processes, subgroups, and outcomes. In general, SIT describes in-group and out-group membership and refers to a body of ideas to explain intergroup relations and group processes (Hogg & Abrams, 1988). SIT is defined as “the individual’s knowledge that he belongs to certain social groups together with some emotional and value significance to him of the group membership” (Tajfel, 1972, p. 31). When it was first developed, SIT theory posed that people tend to satisfy their fundamental self-esteem needs by maximizing differences between in-group and out-group on dimensions that favor positive in-group distinctiveness (Tajfel & Turner, 1979). What it means for team communication is that subgroup members exhibit more frequent and positive communication toward the in-group and negative toward the out-group, potentially resulting in conflict.
According to SCT, self-categorization underlies all processes of identification (Tajfel & Turner, 1979; Turner, 1987). The impact of team diversity on performance is widely researched (Stahl et al., 2010), and so is subgroup identification (Yilmaz & Peña, 2014). However, current knowledge on team heterogeneity does not adequately take into account how global teams form subgroups and how this affects outcomes. These teams are more prone to subgroup dynamics than collocated teams because they are characterized by us-versus-them dynamics across sites (Armstrong & Cole, 1995; Cramton, 2001; Cramton & Hinds, 2005). The process of self-categorization group members experience can hinder communication, provoke stereotypes, and drive competition for resources (Thatcher, Jehn, & Zanutto, 2003).
Team Identification
There are multiple targets of identification in organizational contexts (Ashforth et al., 2008; Scott et al., 1998). The concept of faultlines (Lau & Murnighan, 1998) lends itself to taking the identification lens because of its assumption of subgroups. Many studies have taken either an identity-based or a resource or knowledge-based lens to look at subgroups (Carton & Cummings, 2012). This study takes the identity-based approach.
Identification has been defined as a sense of belonging to a social group (Ashforth & Mael, 1989; Fiol & O’Connor, 2005). Mael and Ashforth (1992) define organizational identification as the “perception of oneness with, or belongingness to, an organization where the individual defines him or herself in terms of the organization in which he or she is a member” (p. 105). From a communicative perspective, organizational identification is the feeling of attachment between individuals and organizations (Scott et al., 1998). Scott et al. offer a mechanism through which identification is communicatively constructed as the attachment to the organization expressed primarily through language: “statements about team membership may further establish one’s belonging to that team, which in turn prompts further expressions of team identification” (p. 306). This approach to identification is useful for looking at subgroups because of identification’s rhetorical nature (Cheney, 1983); accordingly, collective team identification has the potential to communicatively break up subgroup identifications.
This study argues that underlying processes of identification will decrease the subjective perceptions of subgroups in teams. Because team identification has been defined as “glue” that holds the team together (Ashforth & Mael, 1989; Fiol & O’Connor, 2005), it offers the potential to minimize the salience of perceived subgroups. Lipponen, Helkama, and Juslin (2003) found that subgroup identification was positively related to in-group bias, and identification with the organization as a whole (a shipyard) was negatively related to negative bias toward other subgroups in the same organization. According to SIT/SCT, when individuals identify with a shared group membership, the salience of their individuality fades in favor of the superordinate identity (Tajfel & Turner, 1986). In summary, the higher level (team) identification, the higher the potential to minimize salience of perceived subgroups.
In this vein, it is likely that teams which are able to build a climate of shared identification through interactions will be less likely to perceive subgroups. As a result, the effects of dormant faultlines may be mitigated. Jehn and Bezrukova (2010) found, for example, that an amicable and friendly atmosphere in work teams reduced subgroup identifications and affected interaction between subgroups. As a result, it is likely that the team identification will reduce the perceptions of subgroups among team members. Following is the hypothesis (see Figure 1, the conceptual model):

Conceptual model of faultline effects on team satisfaction and innovation.
Psychologically Safe Communication Climate (PSCC)
Research suggests that due to having multiple perspectives, culturally diverse teams tend to produce more nonredundant ideas than homogeneous groups (Daily, Whatley, Ash, & Steiner, 1996). Positive team climate is necessary for unshared information to become part of the group discussion to achieve creativity (Crotty & Brett, 2012). When culturally diverse individuals are comfortable to speak up and participate in decision making, the team environment provides a PSCC (Gibson & Gibbs, 2006). This climate has been found to moderate the relationship between team diversity and innovation in virtual teams (Gibson & Gibbs, 2006).
PSCC is an atmosphere in which team members are willing to speak up, provide unsolicited information, and bridge differences by being open to different perspectives (Edmondson, 1999; Gibson & Gibbs, 2006). Virtual teams with a PSCC engaged in more open and spontaneous communication and knowledge sharing, which leads them to be more innovative (Gibson & Gibbs, 2006). PSCC has been found to help task conflict become positive for team members through the sharing of divergent perspectives (Bradley, Klotz, Postlethwaite, Hamdani, & Brown, 2012). When global team members are comfortable to participate in decision making and express unsolicited feedback, the team environment should encourage interaction between subgroups and diminish the negative effects of faultlines.
Fostering PSCC can help overcome barriers to innovation resulting from geographic dispersion (Donnellon, 1996), cultural or gender differences and, therefore, weaken the negative effects of the dormant faultlines so that team members perceive them as less salient. In addition, PSCC will help increase informal communication both for teams relying on face-to-face and technologically mediated communication, thereby helping to overcome the limitations of Computer Mediated Communication (CMC) such as low level of social cues (Sproull & Kiesler, 1986). When PSCC is high, informal relationships can develop regardless of team members’ location or the overlap of objective diversity characteristics. This rationale suggests the following hypothesis:
Effects of Perceived Subgroups on Team Satisfaction and Innovation
Team Satisfaction
The idea that perceived subgroups affect team outcomes directly underlies the following hypotheses. Once faultlines are activated into subgroups, they have stronger impact on team processes and outcomes. For example, Cronin, Bezrukova, Weingart, and Tinsley (2011) found that teams with strong perceived subgroups experienced lower satisfaction from being part of a team, and they were less effective. Thatcher and colleagues (2003) found slightly more complex (curvilinear) relationships between diversity faultlines and relationship conflict, process conflict, group morale, and group performance. Groups with either no faultlines (very diverse groups) or strong faultlines (split into two fairly homogeneous subgroups) had higher levels of conflict and lower levels of morale and performance than groups with medium faultlines (Earley & Mosakowski, 2000). An experimental study by Rico, Molleman, Sánchez-Manzanares, and Van der Vegt (2007) found that teams with weak faultlines (diverse teams) performed better and reported higher levels of social integration (a concept that includes team satisfaction and cohesion) than did teams with strong faultlines.
A meta-analysis conducted by Stahl et al. (2010) analyzed how team diversity affected outcomes such as team conflict, creativity, or satisfaction, and how these results affected performance. Based on 108 empirical studies, cultural team diversity was positively related to team satisfaction. The results suggest that cultural diversity of teams leads to process losses through task conflict and leads to process gains through increased creativity and satisfaction.
Research on perceived diversity and subgroups is also growing. For example, Shemla and colleagues (2014) reviewed literature on the role of perceived heterogeneity and noted inconsistent research findings: it either negatively or positively affected team processes but perceived subgroups generated mainly negative outcomes (Shemla et al.). This study poses that faultlines may affect team outcomes indirectly, such that perceived subgroups may change the relationship between dormant faultlines and outcomes.
Perceived subgroups increase interaction with the in-group members and decrease interaction with the out-group (Tajfel & Turner, 1979). Based on SIT (Tajfel, 1979), subgroup members exhibit more frequent and positive communication toward the in-group and negative communication toward the out-group, likely resulting in relational conflict between subgroups. Following SIT’s rationale, intergroup tensions may make it difficult for members of different social groups to work together, resulting in lower satisfaction with the global team experience. A meta-analysis by Riketta and van Dick (2005) found that workgroup attachment (combination of workgroup identification and commitment) was positively associated with group satisfaction and climate. Cohesive teams with shared identification and less perceived subgroups may have a better chance to overcome the decline in satisfaction due to the effects of dormant faultlines.
Interpersonal liking and relationships matter for salience of subgroups. The more positive relationships within a team, the more opportunities for team members to interact with one another. Labianca, Brass, and Gray (1998) found that friendships between members of subgroups were conduits for lower perceptions of negative intergroup feelings and conflict. Similarly, Ren, Gray, and Harrison (2014) found friendships that developed between team members from across subgroups diminished the salience of activated faultlines. This rationale suggests that even if the objective faultlines exist, but team members do not perceive them as salient, dormant faultlines will not have negative impact on team satisfaction. If team members through interaction create a climate in which subgroups are not perceived, they will still be satisfied from belonging to the same team:
Team Innovation
As mentioned previously, the findings on the impact of team diversity or team faultlines on team outcomes are mixed due to many mediating and moderating factors (e.g., Gibson, Huang, Kirkman, & Shapiro, 2014). Studies have demonstrated positive (Gong, 2006), negative (Verkuyten, De Jong, & Masson, 1993), mixed (Punnett & Clemens, 1999), or curvilinear effects of diversity on team outcomes (Earley & Mosakowski, 2000; Gibson & Vermeulen, 2003). Research shows that the role of cultural diversity on outcomes in teams depends on the features of the team (Zellmer-Bruhn & Gibson, 2013), such as the age of the team or the type of diversity taken into consideration.
Research on faultlines has been demonstrating negative effects of faultlines on team outcomes, even if they are dormant (Thatcher & Patel, 2012). However, activated faultiness have a larger impact on outcomes (e.g., Antino, Rico, & Thatcher, 2018) than the dormant. According to SIT, the most negative consequence of in-group and out-group dynamics is the lack of inter-subgroup communication (Hogg, 2001) that might stifle team innovation. This process happens because in-group members are more likely to communicate with the members of their own subgroups during formal and informal encounters. Perceived subgroups may lead to the creation of inside jokes and jargon that is understandable to others in the subgroup but obscure to those outside (Leenders, Van Engelen, & Kratzer, 2007; Mikal, Rice, Kent, & Uchino, 2014). Team members may also be less likely to voice opinions contradictory to those shared by the members of their own subgroup. Moreover, in-/out-group dynamics frequently lead to conflict between members from different subgroups and lower group cohesion (Yoon, Baker, & Ko, 1994). In this vein, faultlines might lead to social disintegration, and as a result, reduced abilities of groups to engage effectively in creative processes (Ancona & Caldwell, 1992).
Studies on the effects of dormant and activated faultlines on team creativity and innovation are very limited but there are indications that team creativity might suffer as a result of activated faultlines (Pearsall, Ellis, & Evans, 2008). Pearsall et al. took the SIT framework and, based on research of 80 teams working in different experimental conditions on an idea generation task, found both the level and creativity of idea generation were significantly lower in teams with activated gender faultlines than in teams with no faultlines.
Expressing opinions, no matter how valid and informed they are, is necessary for innovative results. Consequently, lack of inter-subgroup communication stifles innovation. The synthesis of distinct interpretations is necessary for creativity and, ultimately, for innovation (Amabile & Mueller, 2007) but innovation may be impossible to achieve if employees are closed off, or not interacting frequently enough across subgroups. Only if team members are able to share knowledge and communicate across real or perceived boundaries will they be able to gain the resources and support they need to innovate. As suggested by the SIT/SCT framework and rationale in the studies listed in this section, processes of faultline activation affect the relationship between dormant faultlines and outcomes:
Method
Research Context
This study was conducted at Iggitech (pseudonym), a multinational high-tech organization providing software for data management and product design. Iggitech has been in business for more than 25 years and employs teams for software development. Its main divisions are distributed across several continents with main offices in the United States (headquarters [HQ]), South America, and Europe. This research is part of larger mixed-methods study, but the results presented in this article are the results of a quantitative survey of employees of this high-tech multinational organization (n=231). Employees at the core engineering centers mentioned earlier collaborate across regions and functions to develop innovative software solutions.
The majority of employees were software engineers working in teams utilizing the agile software development model. Teams varied in terms of geographical distribution. Task interdependence between geographic locations existed, and, therefore the organization actively supported cross-site collaboration through the use of video- and audio-conferencing. Field studies, such as this one, have been recommended for studying teams in an organizational context (Doerfel & Gibbs, 2014; Hollingshead & Poole, 2012).
Data Collection
To test the hypotheses in this study, a questionnaire of all employees of the organization (n = 278) was conducted in December of 2014. Established survey scales, described in detail in the “Measures” section, were used. The response rate to the organization-wide survey was 83% globally (n = 231). Those who completed the survey were entered in a lottery, and three employees received an award of US$50. After all individual survey responses were collected, technical teams working on software design and development were identified and mid-level managers (overseeing two teams or more) were asked to complete a survey assessing teams’ innovation. Some mid-level managers who managed several teams were excluded from individual-level analysis unless the organizational chart obtained from Human Resources (HR) indicated they were members of technical teams. Departments such as HR, Finance and Accounting, and General Office were also excluded from the survey analysis because they did not rely on teamwork to a similar extent as the technical teams. After excluding the departments mentioned, the sample size was n=165 in n=27 teams.
In the sample of 27 teams, 122 (74%) participants were men and 43 (26%) were women. Most employees in the sample were located in Bulgaria (54%), followed by 34% in the United States, 10 participants in Japan, six in Uruguay, and four in the United Kingdom. Forty percent of participants identified with Bulgarian nationality, 30% with American, and more than 14% with Uruguayan. More than half of employees felt that their English language skills were native or very good; almost half of employees perceived that their English was either good (with minor errors) or weaker. Most participants had a college degree or more (88%), and Millennials (34 or younger at the time of the survey) constituted more than 60% of the sample. See Table 1 for descriptive statistics.
Participant Demographics (n=165).
Note. GED = General Educational Development.
Measures
Faultlines
Faultline is not only a theoretical concept but it also reflects a computational measure of the overlap of demographic characteristics on a team. The following characteristics were taken to calculate team-level faultline as an independent variable using R software (Meyer & Glenz, 2013): location, function, organizational tenure, and gender. Meyer and Glenz’s new cluster-based approach, average silhouette width (ASW) was used because it identifies faultline strength based on various surface-level diversity attributes. Location, function, and organizational tenure were provided by the HR department. An item asking about gender was included in the survey. These four characteristics used to calculate faultlines in this study were found to be highly correlated with related variables. For example, location was related to the nationality item on the survey as well as English Proficiency (see Tables 3 and 4 for correlation results and comparison between diversity attributes taken into calculation of ASW). Organizational tenure was related to age; therefore, age was deemed redundant for ASW calculation. Researchers who developed the ASW measure discourage using variables that are highly correlated in the faultline calculation. In addition, based on observations of meetings of two teams, these four characteristics (location, function, gender, organizational tenure) were the most salient for forming subgroups but location seemed more salient for triggering subgroups than other factors. The weight of 1 (100%) was entered in R for location, and 0.5 (50%) for age, tenure in days and function.
Team identification
This variable was measured by a five-item scale derived from Mael and Ashforth (1992) and adapted to the team-level analysis. A 5-point Likert-type scale was used, ranging from strongly disagree to strongly agree. Sample items included “when I talk about my team, I usually say ‘we’ rather than ‘they’” and “my team’s successes are my successes.” In addition, one item was a modified version of a pictorial measure of interpersonal closeness developed by Aron, Aron, and Smollan (1992) to assess team identification. It was used in other studies (Hinds & Mortensen, 2005; O’Leary & Mortensen, 2009). This overall scale had high reliability (M = 4.32, SD = .23; α = .82). The mean rWG value was .86, exceeding the satisfactory criterion of being more than .70 (James, Demaree, & Wolf, 1984). ICC(1) was −.03, and ICC(2) was −.25.
PSCC
This is a previously developed scale (Gibson & Gibbs, 2006) consisting of five items measured on a 5-point scale, ranging from not at all to very great extent. Sample items included “team members are able to say what they think” and “when there’s a problem, team members talk about it” (M = 4.04, SD = .71; α = .9). The rWG value was .77, ICC(1) was .06, and ICC(2) was .28.
Perceived subgroup strength
This scale consisted of four items based on Cronin et al. (2011). Sample items are “to what extent has your team split into subgroups?” and “to what extent has your team cracked into smaller cliques?” (M = 1.85, SD =.82; α = .89). Respondents rated their choice on a 5-point scale from not at all to very great extent. The rWG value averaged .74, ICC(1) was .07, and ICC(2) was .32.
Team satisfaction
This scale contained items from two separate scales: satisfaction with the team experience (Cramton et al., 2007) and a scale of tenure intentions (Kraut, 1975). The satisfaction of team experience scale included three items measured on a 5-point scale (from strongly disagree to strongly agree) including “I am satisfied with how things in my team are going” and “I am satisfied with how my teammates and I work together.” The scale of tenure intentions consisted of three items, for example: “I expect to stay in my team/work unit for a long time.” The team satisfaction variable appeared reliable (M = 3.54, SD =.54; α = .87). The rWG averaged .8, ICC(1) was .03, and ICC(2) was .1.
Team innovation
The scale used on the study for team-level innovation was measured using four items adapted from Anderson and West (1998) on a 5-point scale (from strongly disagree to strongly agree). Second-level managers were asked to think about innovation of each team’s reporting to them and rank them before choosing their options. Then they were asked “to what extent do you agree or disagree with statements about each team reporting to you now regarding team innovation? Please try to give different ratings to different teams.” Manager ratings resulted in a sample of 27 teams (165 individuals in these teams). Sample items included “team members often implement new ideas to improve the quality of our products and services” and “team members often produce new services, methods or procedures” (α = .89).
Task interdependence
Finally, task interdependence was initially meant to be a control variable, as it has been shown to affect team outcomes in prior research (Pearce & Gregersen, 1991), and the relationship between team identification, subgroups, and innovation is likely to be influenced by the degree of interdependence among team members. During hypothesis testing, however, the variable did not improve the research model and was not included. This variable was measured by a five-item scale derived from Pearce and Gregersen, with responses ranging from strongly disagree to strongly agree. Sample items included “I work closely with my team members in doing my work” and “I frequently must coordinate my efforts with other team members” (M = 3.82, α = .79).
Team size
Team size has been shown to affect team processes and outcomes in previous research, and others have controlled for it in research on distributed teams (Hinds & Mortensen, 2005). Information about belonging to teams was obtained from the mid-high-level employees as HR did not collect and store this information.
Data Analysis
Responses by individual team members may be interdependent within teams, which would lead to violations of the independence assumption in regression analyses (Kenny & LaVoie, 1985). One way to deal with this violation is to conduct multilevel analyses (Bryk & Raudenbusch, 1982). However, similar to other studies (for example by De Dreu & West, 2001), due to the relatively small number of observations (n = 27 teams) in this article, multilevel analysis was deemed less than optimal. An alternative solution is to aggregate individual responses within teams for further analyses, and this is what was done in the study. For example, individual responses about perceived team identification or perceived subgroup salience were aggregated; the mean of team scores was used for hypotheses testing.
Results
Descriptive Statistics
Table 1 contains descriptive statistics of the sample of 165 individuals in the 27 teams used for the analysis. Table 2 displays the means, standard deviations, and zero-order bivariate correlations for the study variables, and Table 3 shows correlations of demographics: HQ versus other locations. Due to the small number of teams (n = 27), the decision was made to increase correlation significance (p) level in this table to 0.1. Dormant faultlines were positively correlated with perceived subgroups (r = .36, p < .1). Faultlines were not directly correlated with the outcome variables (team innovation, team satisfaction), even at the p < .1 level. Perceived subgroups were negatively correlated with team satisfaction (r = −.34, p < .1), but the relationship with team innovation was also negative but not significant (r = −.16, n.s.). Perceived subgroups were correlated with team identification (r = −.36, p < .1) and satisfaction. This suggests that subjective perceptions of subgroups mattered more for team processes and outcomes than dormant faultlines.
Descriptive Statistics and Bivariate Correlations (n = 27).
Note. PSCC = psychologically safe communication climate.
p < .10. *p < .05. **p < .01.
Bivariate Correlations Between HQs and Other Locations’ Demographics (n = 165).
Note. HQ = headquarters.
p <.10. *p <.05. **p <.01.
PSCC and team identification were moderately correlated (r = .55, p < .01), PSCC and team satisfaction were highly correlated (r = .78, p < .01). Team satisfaction was negatively correlated with perceived subgroups (r = −.34, p < .1) but positively correlated with team identification (r = .35, p < .1). Team innovation and faultlines, perceived subgroups, and team satisfaction were correlated negatively at a low level (r = −.16, −.24, −.16, respectively, n.s.).
Hypothesis Testing
Hypotheses were tested for moderation using the SPSS PROCESS v3.1 macro (model 1) developed by Hayes (2017). It produces bootstrapped unstandardized regression output and estimates of the effect of the predictor variables at values of the moderator variables (Hayes). Data were aggregated and analyzed at the team level resulting in a sample of 27 teams. The confidence interval has been set to 95%. The first step was calculating faultline strength. R software including the ASW package was used to calculate each team’s faultline strength according to the guide developed by Meyer and Glenz (2013) and Meyer, Glenz, Antino, Rico, and González-Romá (2014). The following faultlines yielded the most variance and were included in ASW calculation: location, organizational tenure, gender, and functional differences. Table 4 (described earlier) shows factors and weights considered into ASW calculation.
Faultline Strength Measure, Comparison Between Diversity Attributes Taken Into Calculation of ASW.
Note. ASW ranges from 0 to 1. ASW3 was used to calculate faultline in the research model. ASW = average silhouette width.
Regression-based moderation analyses were conducted to test hypotheses (Hayes, 2017). Hypothesis 1 predicted that team identification moderated the relationship between faultlines and subgroup strength in global teams. Table 5 shows that dormant faultlines were significant predictors of perceived subgroups (b = 39.4, p < .05) when controlling for team size. In addition, the interaction between faultlines and identification with effect on subgroups was significant (b = −8.75, p < .05, 95% confidence interval [CI] = [–16.93, –0.58]). The overall model accounted for approximately 40% of the variance in perceived subgroups (R2 = .4, F=5.1, p < .01). To test for Hypothesis 1, the interaction effects were plotted at values of perceived subgroups 1 SD above and 1 SD below the mean. The plot shown in Figure 2 indicates that Hypothesis 1 was supported. When identification level was low, there was a strong positive and significant relationship between the independent and dependent variables. As hypothesized, the relationship between faultlines and perceived subgroups was higher when identification was lower. When the level of identification was high, there was no significant relationship between dormant faultlines and perceived subgroups.
Moderating Effects of Identification (H1) and PSCC (H2) on the Relationship Between Faultlines and Perceived Subgroups (n = 27).
Note. Control variable: team size. b = unstandardized regression coefficient; CI = confidence interval; PSCC = psychologically safe communication climate.
p < .05. **p < .01.

Plot showing moderation interaction effects of faultlines and team identification at values of perceived subgroups 1 SD above and 1 SD below the mean.
Hypothesis 2 posed that PSCC moderates the relationship between faultlines and perceived subgroups in global teams, and it was supported. Table 5 shows that dormant faultlines were significant predictors of perceived subgroups (b = 16.74, p = .004) when controlling for team size. In addition, the interaction between faultlines and PSCC with effects on subgroups was significant (b = −3.8, p < .01, 95% CI = [−6.49, −1.12]). The overall model accounted for approximately 38% (R2 = .38, F = 4.79, p < .01) of the variance in perceived subgroups. To test for Hypothesis 2, the interaction effects were plotted at values of perceived subgroups 1 SD above and 1 SD below the mean. The plot is shown in Figure 3. When PSCC level was high, there was no relationship between dormant and activated faultlines; when it was low, there was a strong significant positive relationship. In teams with a low level of PSCC, faultlines were associated with an increase in perceived subgroups. In other words, teams that fail to build PSCC in their interactions are more likely to perceive subgroups.

Plot showing moderation interaction effects of faultlines and psychologically safe communication climate (PSCC) at values of perceived subgroups 1 SD above and 1 SD below the mean.
Hypothesis 3, predicting that perceived subgroup strength moderated the relationship between faultlines and team satisfaction, was also supported. Table 6 shows that dormant faultlines predicted team satisfaction (b = 5, p < .01) when controlling for team size. The interaction between faultlines and perceived subgroups with effects on team satisfaction was also significant (b = −2.56, p < .05, 95% CI = [−4.58, −0.53]). The model accounted for approximately 32% of the variance in team satisfaction (R2 = .32, F = 3.64, p < .05). The significant interaction effects were plotted at values of perceived subgroups 1 SD above and 1 SD below the mean. The plot is shown in Figure 4. When subgroups were more perceived, there was no relationship between faultlines and team satisfaction; however, when subgroups were less perceived, faultlines predicted higher team satisfaction.
Moderating Effects of Perceived Subgroups on the Relationship Between Faultlines, Team Satisfaction (H3), and Team Innovation (H4) (n = 27).
Note. Control variable: team size. b = unstandardized regression coefficient; CI = confidence interval.
p <.05. **p <.01.

Plot showing moderation interaction effects of faultlines and perceived subgroups at values of team satisfaction 1 SD above and 1 SD below the mean.
Hypothesis 4, about the moderating role of perceived subgroups on the relationship between faultlines and team innovation, was not supported. Dormant faultlines were not significant predictors of team innovation rated by managers. The interaction effect in which perceived subgroups were hypothesized to affect the relationship between perceived subgroups and innovation was also not significant (see the “Discussion” section on the possible reasons).
Discussion
The main purpose of this study was to reveal if and how certain team processes ameliorate the negative effects of faultlines within global teams and enable them to derive benefits of team diversity such as team innovation and satisfaction. When analyzing a survey of 165 team members from 27 teams, three out of four hypotheses were supported. Team identification and PSCC were found to moderate the relationship between faultlines and perceived team subgroups. In teams with low PSCC and identification levels, dormant faultlines predicted increased perceptions of subgroups. In turn, when subgroups were less perceived, faultlines were positively related to team satisfaction. Here is a sample quote from an interview (coming from the same study but full findings are not presented here) supporting these quantitative findings: For innovation you only need to be comfortable in a place you work like when you are happy, you will be able to innovate much better than if you are under pressure or if you are worried constantly. If you are happy and you have a space in which you can express yourself and express your ideas, you will enjoy it. (Andreas, Iggitech Uruguay)
The quote emphasizes the importance of the communication climate for team outcomes. This finding is especially important because it provides evidence on the role of communication in global teams and suggests that teams can be encouraged and trained to strengthen team processes. The findings from this study are promising because they suggest that if global teams with high potential to splinter into subgroups (a high level of dormant faultlines) do not build identification and a PSCC, these dormant faultlines might turn into destructive subgroups, in consequence making it difficult to derive the benefits of diversity and geographic distribution in teams.
Dormant faultlines were not directly related to team processes or outcomes, but perceived subgroups were correlated with team identification and satisfaction. This suggests that subjective perceptions of subgroups matter more for team processes and outcomes than objective faultlines. In moderation analyses, perceived subgroups were found to moderate the relationship between faultlines and team satisfaction, but they had no impact on the relationship between faultlines and innovation. It was hypothesized that perceived subgroups would moderate the relationship between faultlines and team satisfaction in global teams so that if perceived subgroup strength was high, faultlines would negatively affect team satisfaction. Conversely, when perceived subgroup strength was low, faultlines would not negatively affect team satisfaction. The latter was supported in hypothesis testing. Perceived subgroups interacted with faultlines in a way that when team members did not perceive subgroups, faultlines predicted an increase in team satisfaction.
The survey findings showed that even in teams with a high level of dormant faultlines, team members may not perceive subgroups as salient. Moreover, if the level of dormant faultlines is high but team members do not perceive subgroups as salient, satisfaction from being a member of such a team remains high. These findings are particularly interesting because they demonstrate that there are team processes and communicative practices that might explain a high level of team satisfaction. It is rather remarkable that faultlines did not affect team satisfaction directly, suggesting what matters is how or whether they are subjectively perceived by global team members.
There might be at least two reasons for the nonsignificant finding on the moderating effect of perceived subgroups on the relationship between faultlines and innovation. The first one might be related to the way innovation was measured in the study. It was an objective measure of team-level innovation, mid-level managers rated team innovation from their perspective and these independent ratings may have weak reliability. If more than one manager rated some teams (in case of matrix structure of some teams), the average of two or more manager ratings was provided as the “overall team innovation score.” The results might have been more valid and reliable if one person or a committee (for example of top executives) rated innovation of all teams or if the 360°-like metrics of innovation were triangulated. The lack of significance of Hypothesis 4 may well be related to the objective measure of innovation which might need to be improved to reflect the nature of today’s organizational structures. In addition, innovation has been found to have different stages (Baregheh, Rowley, & Sambrook, 2009) and my study did not control for the stages, all teams were in different life cycles. Measurement of team-level performance has faced similar challenges (e.g., Brannick, Salas, & Prince, 1997), although it is likely a more rigorous measure by now. Nevertheless, the qualitative study mentioned earlier provided depth into how communicative practices triggered subgroups and how global teams managed them to remain innovative.
Another reason for the lack of significance of the fourth hypothesis is related to faultline activation. For example, as previously found, the type of faultline (e.g., gender faultline) seems to matter for its activation and impact on creativity (like in the Pearsall et al., 2008 study). An experimental study might be able to parse out the influence of the type of faultline and activation.
Overall, the findings have important implications for theory and future research in several areas: communication climate, diversity and subgroups, as well as global team identification. By developing a stronger theoretical understanding of these processes, the practical recommendations for organizational members (team members and leaders) operating within the realm of innovation within global organizations will be provided.
Theoretical and Practical Implications
Faultlines and subgroups
This study adds to the faultlines and subgroups literature by investigating the role of both objective and subjective, dormant and activated subgroups. In line with previous studies (e.g., reviewed by Shemla et al., 2014; Thatcher & Patel, 2011), team diversity did not affect team processes and outcomes directly but rather indirectly through team members’ perception of subgroups, which in turn affected team processes and outcomes. Studying perceived subgroups enables researchers to move beyond a static view of diversity in teams (Zellmer-Bruhn, Maloney, Bhappu, & Salvador, 2008). The results of the study complicate faultline theory (Lau & Murnighan, 1998) and add to the literature on the importance of subjectively perceived, socially constructed subgroups.
This study adds additional components to the faultlines literature. Low levels of certain team processes can have harmful effects for global teams, escalating the role of dormant faultlines (resulting from overlap of geographic location, gender, functional, and organizational tenure differences), and making subjective subgroups salient. If global team members do not build a climate of psychological safety (Gibson & Gibbs, 2006)—in which each team member’s opinion is valued, they feel free to express opinions, perceive less divisiveness, and build shared team identification—the effects on team outcomes might be counterproductive.
Global team communication
This study also adds to the communicatively constructed identification literature (Cheney, 1983; Scott et al., 1998) on team level of identification. This project adds to the SIT/SCT framework because, similar to early studies on building superordinate team identity (Sherif, Harvey, White, Hood, & Sherif, 1961), building a team-level identity can help mitigate the negative effects of subgroup identities. It was found that if the level of team identification is low, it can contribute to the dormant faultlines coalescing into subgroups. This finding is notable as it extends communicatively constructed identification theory to the level of subgroups and teams in global teams interacting over distance.
This article adds to the theoretical debate about the role of diversity in team processes and outcomes in the context of globally distributed teams but in contradiction to the findings of network homophily theory (e.g., Yuan & Gay, 2006), suggests that teams should not strive for stronger homogeneity and reduced geographic distribution. Rather, teams should strengthen their communicative practices, for example, by providing ample training and team building. Foremost, the study adds to the line of research on communication climate and global team identification (Ashforth & Mael, 1989). PSCC has previously been found to be a moderator in the relationship between team diversity and innovation (Gibson & Gibbs, 2006). Correspondingly, teams unable to build PSCC and team identification through interactions may experience an increase in the subjectively perceived subgroups.
Practical implications
The findings also offer important practical implications. One of them is that the lack of certain team processes has the potential to harm teams. Global team leaders should be proactive and increase team member interaction to build the processes of identification and PSCC to derive benefits stemming from diversity. By improving team dynamics, global teams can minimize process losses due to team diversity and geographical dispersion and reap the benefits of global talent. One way to manage team diversity is to encourage teams to build stronger team identification and promote the inclusion of all team members by fostering PSCC because insufficient levels of these processes may turn dormant faultlines into subjectively perceived and harmful subgroups.
Another practical implication is that breaking up cultural cliques to prevent strong subgroups from forming (Earley & Mosakowski, 2000; Gibson & Vermeulen, 2003) may lead to higher team satisfaction and employee morale. Breaking up cliques can be accomplished by organizing team building and office configurations to increase cross-cultural interaction both within and across locations (Gibbs & Boyraz, 2015), rather than allowing for strong cultural subgroups to form that are aligned with geographical location, creating divisive rifts and negative attributions (Cramton & Hinds, 2005; Hinds et al., 2011; Yilmaz & Peña, 2014). Perceived subgroups have impact on the relationship between dormant subgroups and team satisfaction and although not having an impact on team innovation in this study, they might affect other important outcomes for teams as well. Future studies should look at other outcomes of team faultlines and subgroups over time.
Limitations and Future Directions
The main limitation of this study is that the research sample consists of 27 teams from one organization, which may decrease the generalizability of findings. The high response rate (83%) of the survey is promising; however, limitations related to cross-sectional surveys apply to this study. Adding qualitative data analysis would provide deeper understanding of communicatively constructed team identification and PSCC and their role in team processes and outcomes. Because previous research indicated that the influences of team climate may vary by a range of contextual factors and communicative interactions, it is important to qualitatively examine the interplay between dormant faultlines and perceived subgroups as well as their effects on team outcomes such as team satisfaction, innovation, and performance. Moreover, another limitation of this study is that it did not look at actual interaction between team members.
Future studies should look at long-term impacts of team diversity on subgroups in larger samples of teams, especially in field settings. Different configurations of diversity characteristics may engender specific challenges for teams depending on team task and organizational structure. A fruitful way to move this line of research forward would be to analyze interactions and their role for ameliorating the effects of dormant faultlines. Therefore, providing more context through mixed-methods studies should provide an even better understanding of the effects of objective team diversity characteristics and organizational team outcomes. Nonetheless, continued empirical research on the interaction processes leading to innovation and satisfaction in organizational teams is definitely needed.
Conclusion
Based upon the present study, both faultlines (Lau & Murnighan, 1998) and perceived subgroups have important theoretical contributions to the study of global team interactions. Team diversity becomes visible in team interactions and, along with physical proximity, affects who talks to whom. Subgroup formation may inhibit global team processes, stifle innovation, and reduce morale and if teams are unable to build certain communicative practices, subgroups may be more likely to gel. The findings of this study suggest the outcomes of distributed and culturally diverse teams are not only dependent on the alignment of team diversity characteristics and distribution of teams but on how likely teams are to build shared team identity, foster PSCC, and the subjective perception of subgroups. It was found that team satisfaction may depend on the perceptions of subgroups and team interactions. It is important to focus on overcoming the challenges of working in global teams as these challenges—related to factors such as geographic distribution, cultural diversity, and dependency on technology—will continue to be important in the workplace.
Footnotes
Acknowledgements
The author wishes to thank Keri Stephens and the anonymous reviewers for their helpful suggestions. The author also appreciates the valuable feedback from Jennifer Gibbs, Craig Scott, Brent Ruben, and Stacey Connaughton on earlier versions of this paper.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
