DP3613 Cultural Inertia and Uniformity in Organizations

Author(s): Juan D Carrillo, Denis Gromb
Publication Date: October 2002
Keyword(s): inertia, culture in organizations, diversification, screening, uniformity
JEL(s): L20
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3613

We analyse aspects of the structure of organizational culture. We show that old and culturally uniform organizations are prone to cultural inertia; that is they are reluctant to adopt a different culture in response to a change in the environment. Cultural uniformity can be beneficial because the associated inertia protects and therefore encourages culture-specific investments by agents within the organization. We also explore the model’s implications for such issues as cultural uniformity within an organization, cultural heterogeneity across organizations, the destabilizing effect of growth and mergers, and the conflicts arising in the management of organizational culture.