Corporate Culture: Evidence from the Field

John R. Graham, Campbell R. Harvey, Jillian Popadak, Shivaram Rajgopal

NBER Working Paper No. 23255
Issued in March 2017
NBER Program(s):Corporate Finance, Industrial Organization, Political Economy

Does corporate culture matter? Can differences in corporate culture explain why similar firms diverge with one succeeding and the other failing? To answer these questions, we use 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 their culture would increase their firm's value. Surprisingly, only 16% believe their culture is where it should be. Executives link culture to ethical choices (compliance, short-termism), innovation (creativity, taking appropriate risk), and value creation (productivity, acquisition premia). We assess these links within a framework that implies cultural effectiveness depends on interactions between cultural values, norms, and formal institutions. Our evidence suggests that cultural norms are as important as stated values in achieving success.

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Document Object Identifier (DOI): 10.3386/w23255

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