Working Paper: CEPR ID: DP3613
Authors: Juan D. Carrillo; Denis Gromb
Abstract: We analyse aspects of the structure of organizational culture. We show that old and culturally uniform organizations are prone to cultural inertia; that is they are reluctant to adopt a different culture in response to a change in the environment. Cultural uniformity can be beneficial because the associated inertia protects and therefore encourages culture-specific investments by agents within the organization. We also explore the model?s implications for such issues as cultural uniformity within an organization, cultural heterogeneity across organizations, the destabilizing effect of growth and mergers, and the conflicts arising in the management of organizational culture.
Keywords: inertia; culture in organizations; diversification; screening; uniformity
JEL Codes: L20; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Older organizations (L26) | increased cultural inertia (Z10) |
| cultural capital (Z10) | increased cultural inertia (Z10) |
| cultural uniformity (Z10) | decreased adaptability (L15) |
| cultural diversity (Z10) | increased adaptability (D29) |
| cultural structure (Z10) | incentive problems (D82) |
| cultural uniformity (Z10) | fosters culture-specific investments (F20) |
| multiple cultures (Z10) | weaker incentives for culture-specific investments (F69) |
| fast-growing organizations (L25) | challenges in maintaining cultural inertia (Z10) |
| cultural compatibility (L15) | success of organizational mergers (G34) |