Does Culture Pay? Evidence from Crowdsourced Employee Engagement Data
78 Pages Posted: 24 Jun 2017 Last revised: 26 Dec 2018
Date Written: February 28, 2018
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
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