Integrity, Creativity, and Corporate Culture
49 Pages Posted: 11 Mar 2016 Last revised: 5 Dec 2017
Date Written: April 19, 2017
We highlight a potential trade-off between integrity and innovation in corporate culture. In particular, cultures that neglect integrity are associated with a greater probability of SEC enforcement actions for accounting misstatements, lower corporate ethics ratings by external analysts, and greater tax-avoidance. However, firms that score lower on measures of integrity within a given industry also have higher research and development output, more patents and patent citations, and greater patent diversity. Moreover, post-takeover research productivity of inventors decreases (increases) when they are merged into cultures with relatively higher (lower) scores on integrity. These results provide a potential explanation for the difficulty that firms have in sustaining integrity as a key corporate value.
Keywords: Corporate culture, Integrity, Creativity, R&D
JEL Classification: M14, G03
Suggested Citation: Suggested Citation