Corporate Culture: Evidence from the Field
87 Pages Posted: 9 Jul 2016 Last revised: 11 Oct 2018
Date Written: October 10, 2018
Does corporate culture matter? Can differences in corporate culture explain why similar firms diverge, with one succeeding and the other failing? To address these difficult questions, we conduct a novel survey and interview-based analysis of 1,348 North American firms. Over half of senior executives believe that corporate culture is a top-three driver of firm value and 92% believe that improving culture would increase their firm's value. Surprisingly, only 16% of executives believe their corporate culture is where it should be. Executives also link culture to ethical choices (compliance, short-termism), innovation (creativity, taking appropriate risk), and value creation (productivity, acquisition premia). For example, 85% believe a poorly implemented, ineffective culture increases the chance that an employee might act unethically or even illegally. We assess these links within a framework that implies cultural effectiveness depends on interactions between cultural values, norms, and formal institutions.
See our related paper: Corporate Culture: The Interview Evidence.
Keywords: Corporate Culture, Values, Norms, Leadership, Corporate Governance, Incentive Compensation, Informal Institutions, Intangible Assets, Valuation, Finance, Risk-taking, Short-termism, Myopia, Innovation, Firm Value, Productivity, M&A valuation, Integrity, Trust, Ethics, Compliance, Earnings Management
JEL Classification: G3, Z1, D23, G23, G30, K22, M14, O16
Suggested Citation: Suggested Citation