Does Culture Pay? Evidence from Crowdsourced Employee Engagement Data

78 Pages Posted: 24 Jun 2017 Last revised: 26 Dec 2018

See all articles by Christos Makridis

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Government of the United States of America - Council of Economic Advisors

Date Written: February 28, 2018

Abstract

Corporate culture is increasingly important for retention and employee motivation. First, using a new survey tool with PayScale.com, I show that culture is strongly correlated with employee engagement and both firm productivity and occupational skills. Moreover, a value-weighted portfolio of companies with high culture earns a monthly four-factor alpha that is 7.5% higher than their counterparts. Second, to understand the mechanism behind these correlations, I exploit plausibly exogenous variation in employees' outside options and find that employees are willing to give up 1.7% of their annual earnings ($1,159/year) for a standard deviation increase in culture.

Keywords: Organizational practices, job satisfaction, turnover, compensating differentials, productivity

JEL Classification: L20, M51, M52, M54, M55

Suggested Citation

Makridis, Christos, Does Culture Pay? Evidence from Crowdsourced Employee Engagement Data (February 28, 2018). Available at SSRN: https://ssrn.com/abstract=2990210 or http://dx.doi.org/10.2139/ssrn.2990210

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Government of the United States of America - Council of Economic Advisors ( email )

Eisenhower Executive Office Building
17th and Pennsylvania Avenue, NW
Washington, DC 20502
United States

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