NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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):   CF   IO   POL

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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