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Gender diversity is known to trigger creative and relationship conflicts alike, the former a boon for innovation and the latter a bane. This study aims to explore the possibility of a gender mix that is “just right” for balancing the intensities of varied forms of conflict to boost innovation in firms in India. Specifically, this paper investigated the presence of an optimal level of women as a percentage of the firm’s full-time permanent employees (Percent-Women) that maximized the firm’s likelihood of product innovation (Product–Innovation–Likelihood).

Logistic regression analyses of firm-level data of Indian establishments of varied sizes and industries from World Bank Enterprise Surveys 2014 was performed. Instrumental variable addressed the potential endogeneity of Percent-Women.

The analysis demonstrated an inverted U-shaped relationship between Product–Innovation–Likelihood and Percent-Women. Product–Innovation–Likelihood peaked when Percent-Women lay between 35% and 58%, i.e. when the firm was gender-balanced or close to it.

The finding of an optimal level of female inclusion presents to firms a defined target of gender mix to be achieved, failing to which they may be limiting their innovation potential. It compels firms to view gender diversity as a business imperative with definite implications for their long-term performance.

For India, the demonstrated relationship between workplace gender diversity and innovation brings additional reason and urgency to public initiatives, such as female literacy, for boosting female economic engagement. Innovation can power the next stage of the Indian growth story by engaging the heretofore insufficiently tapped female worker.

By demonstrating an optimal degree of female inclusion at which innovation potential peaks, the study reconciled opposing theories of diversity-driven conflicts and went beyond the commonly observed simple linear relationship between female inclusion and innovation. Further, the paper focused on India, a major developing economy with a vast female populace and growing innovation ambitions but scarcely researched for gender diversity’s role in innovation.