Culture Clash: The Costs and Benefits of Homogeneity

38 Pages Posted: 13 Jul 2009

See all articles by Eric Van den Steen

Eric Van den Steen

Harvard Business School - Strategy Unit

Date Written: July 8, 2009

Abstract

This paper develops an economic theory of the costs and benefits of corporate culture - in the sense of shared beliefs and values - in order to study the effects of ‘culture clash’ in mergers and acquisitions. I first use a simple analytical framework to show that shared beliefs lead to more delegation, less monitoring, higher utility (or satisfaction), higher execution effort (or motivation), faster coordination, less influence activities, and more communication, but also to less experimentation and less information collection. When two firms that are each internally homogenous but different from each other, merge, the above results translate to specific predictions how the change in homogeneity will affect firm behavior. The paper’s predictions can also serve more in general as a test for the theory of culture as homogeneity of beliefs.

Suggested Citation

van den Steen, Eric, Culture Clash: The Costs and Benefits of Homogeneity (July 8, 2009). Harvard Business School Strategy Unit Working Paper No. 10-003. Available at SSRN: https://ssrn.com/abstract=1432446 or http://dx.doi.org/10.2139/ssrn.1432446

Eric Van den Steen (Contact Author)

Harvard Business School - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

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