Corporate Culture As an Implicit Contract

49 Pages Posted: 26 Jul 2019

See all articles by Jessica Jeffers

Jessica Jeffers

University of Chicago - Booth School of Business

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: July 24, 2019

Abstract

We develop a measure of corporate culture using coworker connectivity on LinkedIn's platform, and show it is strongly correlated with positive employee relations and satisfaction. Using state-level changes to employment agreements as shocks to explicit contracts, we find that these changes significantly impact employees in weakly connected firms, but have little to no effect on those at strongly connected firms. Our results suggest that firms with strong corporate culture are less dependent on explicit contracts to retain human capital. We document implications for firms' investment decisions and other outcomes.

Keywords: Corporate Culture, Human Capital, Implicit Contracts, Non-competes

JEL Classification: M14, J24, J41, L14

Suggested Citation

Jeffers, Jessica and Lee, Michael, Corporate Culture As an Implicit Contract (July 24, 2019). Available at SSRN: https://ssrn.com/abstract=3426060 or http://dx.doi.org/10.2139/ssrn.3426060

Jessica Jeffers (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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