Measuring Corporate Culture
In a working paper, Henrik Cronqvist (Ohio State University Fisher College of Business), Angie Low (OSU and the Nanyang Technological University business school), and Mattias Nilsson (Worcester Polytechnic Department of Management) ask, "Does Corporate Culure Matter for Firm Policies?"Cronqvist, Low, and Nilsson conclude that the answer is Yes, which is none too surprising. More notable is the quantitative methodology behind their research. As the authors explain,
We construct a parent-spinoff firm panel dataset that allows us to identify culture effects in firm policies from behavior that is inherited by a spinoff firm from its parent after the firms split up. We find positive and significant relations between spinoff firms’ and their parents’ choices of investment [e.g., how much growth is from acquisition], financial [e.g., leverage], and operational policies [e.g., spending on R&D]. Consistent with predictions from economic theories of corporate culture, we find that the culture effects are long-term and stronger for internally grown business units and older firms. Our evidence also suggests that firms preserve their cultures by selecting managers who fit into their cultures. Finally, we find a strong relation between spinoff firms’ and their parents’ profitability, suggesting that corporate culture ultimately also affects economic performance.The key here is to identify measurable variables that reflect corporate culture.
Labels: Organizational culture
posted by Karen Nelson @ 11:17 PM
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